What the same basket costs later
Inflation is the rate at which money loses purchasing power. This calculator runs it forwards: given an amount today and a rate, what will the equivalent cost in some number of years?
The formula
Worked example: $1,000 at 3% for 10 years
- Future cost: $1,343.92
- Increase: $343.92, or 34.4%
Note that 3% over ten years produces 34.4%, not 30%. Inflation compounds like everything else — each year's rise applies to the already-risen price.
How the horizon changes it
| Years | At 2% | At 3% | At 5% |
|---|---|---|---|
| 5 | $1,104 | $1,159 | $1,276 |
| 10 | $1,219 | $1,344 | $1,629 |
| 20 | $1,486 | $1,806 | $2,653 |
| 30 | $1,811 | $2,427 | $4,322 |
Over thirty years, one extra point of inflation costs $616 on every $1,000 of spending. That difference is why a retirement plan built on 2% and lived through at 3% falls short.
Why your inflation is not the headline rate
The published figure is an average across a basket that may not resemble your spending. Someone renting in a tight housing market and paying for childcare experiences a very different rate from a homeowner with a fixed mortgage and grown children.
Housing, education and healthcare have persistently outrun the general index; electronics and clothing have persistently trailed it. Your personal rate depends on which of these dominates your budget.
What it means for savings
Money held in cash at 1% while inflation runs at 3% loses 2% of its purchasing power a year. Over ten years, $10,000 in that account is nominally $11,046 and buys what $8,220 buys today.
This is the argument for investing anything not needed within a few years. It is also the argument against holding a large emergency fund beyond what it is for.
What this calculator leaves out
That inflation is not steady. The 2020s saw rates move from under 2% to over 9% and back within three years, and no single-rate projection captures that.
Running it backwards, into the past
The same formula converts historical prices into today's money. A $30,000 salary in 1995 needed roughly $62,000 in 2025 to buy the same life — the nominal figure nearly doubled while the standard of living stayed flat.
This is the correct way to compare wages, house prices or costs across decades. Almost every claim that something used to be cheap collapses once the comparison is made in constant money, and the few that survive are the ones worth arguing about.
Why two percent is the target
Most central banks aim for 2% rather than zero, for two reasons. A small positive rate gives room to cut interest rates in a downturn, and it avoids deflation, where falling prices cause people to postpone purchases and the economy contracts further.
Two percent is low enough to be ignorable month to month and high enough to keep the mechanism working. It is also, as the table shows, enough to halve purchasing power across a 35-year working life.
Related calculators
- Buying power calculator — the same maths seen from the other end
- Real return calculator — investment growth after inflation
- CPI calculator — the rate between two index readings