Inflation Calculator: What Your Money Is Really Worth

What a fixed sum still buys, year by year

Cash left alone does not shrink — the number stays the same. What shrinks is the pile of goods that number will buy. The calculation is one line: real value = amount ÷ (1 + rate)^years. Below is what £1,000 sitting untouched would still buy, at four illustrative rates. These are chosen round numbers for demonstration, not measured inflation for any country or period. The currency does not matter; the arithmetic is identical in dollars, pounds, euros or rupees.

Read the 3% row across and the shape of the problem is obvious: the loss is barely noticeable over five years and brutal over thirty. That is why inflation is easy to ignore right up until it matters. Scale the numbers freely — at 3% over 20 years, £10,000 becomes £5,537 and £100,000 becomes £55,368, because the ratio is the same.

The second mode of the calculator answers the mirror-image question, which is the one you actually need when planning: not “what will this be worth” but how much will I need. Multiply instead of divide. At the same illustrative 3%, matching £10,000 of today’s buying power in 20 years takes £18,061 — an 80.6% increase just to stand still. If you are setting a savings target for a wedding, a deposit or a sabbatical years out, that is the target, not the figure that feels right today.

Your balance can grow while what it buys shrinks

This is the part most inflation calculators leave out, and it is the part that costs people the most. A savings account paying interest always shows a bigger number next year than this year, so it never feels like a loss. Take £10,000 in an account paying an illustrative 1% while prices rise at an illustrative 3%. After 20 years the statement says £12,202— you are up 22%. In today’s money it buys £6,756 worth of goods. You lost a third of your purchasing power while watching the balance rise every single year.

The right measure is the real return, and it is a division, not a subtraction: (1 + nominal) ÷ (1 + inflation) − 1. Most people subtract instead, which is close enough for conversation and wrong enough to matter over decades:

The gap looks trivial and compounds anyway. Growing £10,000 for 20 years at the exact 1.94% gives £14,691; using the rounded 2.00% gives £14,859. The approximation overstates you by £169, and it drifts further the higher the numbers get — notice the 8%-against-5% row, where subtraction is out by 0.14 percentage points rather than 0.06. Only the exact figures are equal to zero at the same rate, which is the sanity check that matters: when your savings rate equals inflation you have gained precisely nothing.

The forward mode of the calculator does this for you — enter your savings rate next to your inflation assumption and it reports both figures side by side so you can see the gap. If you want to model the growth side in more detail, use the compound interest calculator and then bring the ending balance back here to see it in today’s money.

The rule of 72 is an approximation, and here is where it drifts

Divide 72 by the rate and you get roughly the years for prices to double — or, read the other way, for money to halve in real terms. It is a genuinely useful piece of mental arithmetic. It is also an approximation, and it is only sharp in a narrow band. The exact answer is ln 2 ÷ ln(1 + rate), which is what the calculator shows next to the shortcut.

The rule is essentially exact around 8% and overshoots at low rates — at 1% it is more than two years long, an error of about 3%. It undershoots slightly at high rates. In percentage terms it is at its worst exactly where people most often use it: the low, calm rates of a normal decade. Good enough for a pub argument, not for a plan. Our guide to the rule of 72 covers where the number 72 comes from and when to swap it for 69 or 70.

Your personal inflation rate is not the headline rate

A national inflation figure is a weighted average over a fixed basket of goods and services, weighted by what a representative household spends. You are not that household. Nobody is. Your own rate is the same weighted average taken over your spending, and it can sit well above or below the published number for years at a time without either figure being wrong.

Some structural reasons yours will differ:

• Housing dominates and varies most. Rent, mortgage interest and energy are the largest lines in most budgets, and different statistical measures treat owner-occupied housing differently. A renter facing a renewal and an owner on a fixed rate are having completely different years.
• Life stage changes the basket. Childcare, tuition, commuting and healthcare are enormous for some households and literally zero for others, and they rarely move at the average pace.
• Substitution is personal. Indices assume some switching to cheaper alternatives when prices rise. If you cannot or will not switch — a specific medication, a fixed commute — you feel more of the increase than the index records.
• Averages hide the spread.A modest overall figure is routinely made of one category falling sharply and another rising sharply. If your spending is concentrated in the rising one, the headline describes someone else’s year.

The practical move is to build a rough rate of your own. List your five or six biggest annual outgoings, note what each cost last year and this year, weight them by size, and use that as the rate you type into the calculator. It will be crude, and it will still describe your finances better than any national figure. Several statistics offices now publish personal inflation calculators for exactly this reason.

Use a real price index for past-to-present questions

“What would my grandfather’s salary be worth today?” is a different question from “what will my money be worth in 2040?”. The future one needs an assumption. The past one has an answer, because the price level was measured — and guessing an average rate for a period that has already happened throws that away.

The third mode does it properly. Look up the index value for the earlier date and for the later date, and it scales your amount by the ratio:

The tool also reports the implied average annual rate over the span, which is often the more interesting output — it tells you what a single steady rate would have had to be to produce the change actually measured. Note that the values pre-filled in the index boxes are round placeholders to show the shape of the calculation. They are not data, and this page deliberately quotes no index values at all, because a stale index number copied off a web page is worse than none. Get yours from the source:

• United States — Bureau of Labor Statistics (bls.gov), CPI databases
• United Kingdom — Office for National Statistics (ons.gov.uk), CPI and CPIH series
• Canada — Statistics Canada; Australia — Australian Bureau of Statistics; Euro area — Eurostat
• Anywhere else — your national statistics office publishes the same series, usually free

Two cautions when you do. Make sure both index values come from the same series with the same base year — mixing series, or one that was rebased partway, produces a confidently wrong answer. And treat long comparisons as approximations regardless: a basket from decades ago contains goods that no longer exist and excludes things nobody could then buy, so the further back you go, the more the comparison is an illustration rather than a measurement.

This page is general information, not financial advice. It makes no forecast about future inflation, and every rate shown is an illustration chosen for arithmetic clarity. For decisions that matter — retirement, a mortgage, a long savings plan — speak to a qualified adviser regulated in your country.

Frequently asked questions