What inflation does to your money
Inflation is the steady, broad rise in prices over time. When prices climb, every dollar, peso or euro you hold buys a little less than it used to. That buying capacity is your purchasing power: the amount of goods and services a fixed sum can actually get you. A banknote left in a drawer keeps the same number printed on it, but not the same value. Inflation drains it quietly, year after year.
This calculator makes that drain visible through two mirror questions. First: how much money will I need in the future to buy what I buy today? Second: what will the money I hold now truly be worth, measured in today’s terms? Every calculation runs in your browser, and none of your figures ever leave your device.
How to use the calculator
You only need three numbers and a currency:
- Current amount: the sum you want to analyze (for example,
10000). - Annual inflation rate (%): you set it. We do not pull historical series or official forecasts; type whatever scenario you want to test (say,
6). - Years: the horizon you care about (
10).
Instantly you get three results: the future equivalent you will need to keep the same purchasing power, the real purchasing power of that money at the end of the period, and the cumulative loss of purchasing power as a percentage. The year-by-year breakdown shows how the erosion builds. Set inflation to 0% and the money keeps all of its value, with zero loss.
The formula
It rests on two symmetric compound-growth expressions. With rate as a decimal (6% → 0.06) and years as the number of periods:
Future equivalent = amount × (1 + rate)^years
Real purchasing power = amount ÷ (1 + rate)^years
The cumulative loss of purchasing power comes from comparing real power against the original amount:
Loss (%) = (1 − real_power ÷ amount) × 100
The key idea is that inflation is multiplicative: each year applies to the already-adjusted balance from the year before, not to the starting amount. That is why the erosion accelerates over time, exactly like compound interest but working against you.
Worked example
You hold 10,000 and assume 6% annual inflation over 10 years.
- Factor:
(1 + 0.06)^10 = 1.790847. - Future equivalent:
10000 × 1.790847 = 17,908.48. Ten years from now you will need almost 18,000 to buy what 10,000 buys today. - Real purchasing power:
10000 ÷ 1.790847 = 5,583.95. Those same 10,000, left untouched, will be worth about 5,583.95 in today’s money. - Cumulative loss:
(1 − 5583.95 ÷ 10000) × 100 = 44.16%. You have lost nearly half of your purchasing power.
Table: 10,000 at 6% per year
| Years | Future equivalent | Real power | Loss |
|---|---|---|---|
| 1 | 10,600.00 | 9,433.96 | 5.66% |
| 5 | 13,382.26 | 7,472.58 | 25.27% |
| 10 | 17,908.48 | 5,583.95 | 44.16% |
| 15 | 23,965.58 | 4,172.65 | 58.27% |
| 20 | 32,071.35 | 3,118.05 | 68.82% |
Notice that at just 6% a year, idle money loses almost 69% of its value over two decades. That is the core reason to put savings into instruments that earn at least more than inflation.
Frequently asked questions
Where does the inflation rate come from?
You provide it. This tool is a scenario simulator, not a source of official data. To use a real figure, look up your country’s consumer price index (CPI) at its central bank or statistics office and paste it into the rate field.
Why don’t the future equivalent and real power add up the same?
Because they are inverse operations but not equal in magnitude. Multiplying by (1 + rate)^years grows faster than dividing by that same factor shrinks. So the future equivalent runs upward while real power drifts toward zero without ever reaching it.
Can I use it to plan retirement or a long-term goal?
Yes, as a first pass. It shows how much your money must grow just to avoid losing ground. For a serious goal, pair it with a compound-interest calculator: inflation tells you the minimum hurdle your investment must clear.
What happens if I set inflation to 0%?
The factor (1 + 0)^years equals 1, so the future equivalent and real power both match the original amount and the loss is 0%. It is a theoretical baseline useful for comparing against positive inflation.
Can I simulate deflation (negative inflation)?
This calculator works with rates of 0% or higher, which is the common case. Under deflation (falling prices) purchasing power would rise, but that is a rare phenomenon with different economic effects, so we leave it out here.