Inflation Purchasing Power Calculator

Enter a current amount, the number of years and an annual inflation rate. The calculator shows how much the same basket could cost in future and what an unchanged cash amount could be worth in today's spending terms.

You can also enter an optional nominal annual investment return. This adds an illustration of how the starting amount could grow, both before and after accounting for inflation.

How the calculation works

Inflation is compounded annually over the selected period. The future cost of today's basket is calculated by increasing the current amount by the chosen inflation rate each year.

The purchasing power result looks at the calculation from the other direction. It shows what an unchanged amount of money could buy in today's terms after the effect of inflation. The purchasing-power loss is the difference between the amount entered and this inflation-adjusted value.

If you include an investment return, that rate is also compounded annually. The calculator shows:

• the grown nominal balance, before adjusting for inflation
• the real balance, expressed in today's spending terms
• the exact real annual return, based on the relationship between the nominal return and inflation
• a chart comparing the nominal balance, its real value and the future basket cost

A positive nominal return does not necessarily mean your spending power has increased. The real return depends on how the investment return compares with inflation.

The calculator also supports zero inflation, a zero investment return and deflation. With deflation, the displayed purchasing-power loss may instead represent a gain in purchasing power.

Understanding your results

The future basket cost estimates the amount you might need in future to buy something that costs the entered amount today.

The unchanged amount result shows the spending power of money that does not grow. The real balance applies the same inflation adjustment to the optional grown investment balance.

These figures are illustrations, not forecasts. Try different rates and periods to see how compounding can change the result.

Important limitations

• The calculator assumes that inflation remains constant throughout the selected period. This is a simplifying assumption.
• Any investment return entered is also treated as a constant annual rate.
• Actual inflation and investment returns vary from year to year.
• Investment values can fall, so an entered return is not guaranteed.
• The results are illustrative and should not be treated as personalised financial, tax or investment advice.