Inflation Calculator: Formula and Examples
Estimate the future cost of a purchase and the purchasing power of unchanged cash.
How the calculation works
Inflation raises prices and reduces what the same cash amount can purchase. A negative assumption represents deflation. The entered rate is a scenario, not a forecast.
Inflation formula
Future cost = current cost × (1 + inflation)^years. Purchasing power = unchanged cash ÷ (1 + inflation)^years.
Worked example
At 3% inflation for 10 years, a $1,000 purchase costs about $1,343.92; unchanged $1,000 cash has about $744.09 of today’s purchasing power.
Inputs, assumptions, and interpretation
Amounts and rates apply only to the defined scenario. For projections, returns remain constant and timing follows the selected input. Taxes, market variability, and unentered costs are excluded.
Displayed values are rounded, while calculations use unrounded numbers. The charts show modeled values rather than historical performance. For background, see Investor.gov introduction to investment returns.
Frequently asked questions
Are the default rates guaranteed?
No. Default inputs illustrate how the calculation works. Enter rates and contribution amounts relevant to your scenario, and review the applicable account or scheme terms.
Why might an actual statement differ?
Actual payment dates, compounding conventions, changing returns, fees, tax treatment, and account rules can differ from a simplified projection.
How should I interpret a negative result?
Some comparisons or value changes can be negative, including investment losses or a gap between alternative scenarios. Read the result labels to distinguish a balance from a change in value.