Plot No. 16 · Money & Finance
Inflation Calculator
See how inflation erodes the value of money over time. The calculator compounds prices with future cost = amount x (1 + r)^t, where r is the annual inflation rate and t the years, and divides by the same factor to show today's buying power. At the defaults, 1,000 at 3% for 10 years needs 1,343.92 to buy the same goods, and 1,000 kept as cash buys only 744.09 of today's goods.
Future value = amount times (1 + rate) raised to the power of the number of years. The same goods that cost the amount today will cost the future figure once inflation compounds.
The link saves your inputs so you can bookmark or share this exact result.
The inflation formula, worked through
Take the defaults: £1,000 at 3% inflation for 10 years. Each year prices are multiplied by 1 + 0.03 = 1.03, so over 10 years the price factor is 1.03^10 = 1.343916. The goods that cost £1,000 today will cost £1,000 x 1.343916 = £1,343.92, a cumulative rise of 34.4%.
Buying power runs the same factor the other way: £1,000 / 1.343916 = £744.09. That is what £1,000 kept in cash will buy in 10years, measured in today's prices. Note that the cumulative rise (34.4%) is more than 10 x 3% = 30%, because each year's rise is charged on prices that have already risen. The calculator assumes one constant rate. Real inflation moves around year to year, so treat a long projection as a planning figure, not a forecast.
To go backwards from two prices, the average annual rate is (end / start)^(1 / years) - 1. A basket that went from £1,000 to £1,500 over 15 years rose by an average of 2.74% a year.
What £1,000 of goods will cost in the future
Future price of goods that cost £1,000 today, at a constant annual inflation rate. Read across for time and down for rate. The figures work for any amount: divide by 1,000 to get the price multiplier.
| Inflation | 5 years | 10 years | 15 years | 20 years | 25 years | 30 years |
|---|---|---|---|---|---|---|
| 1% | £1,051 | £1,105 | £1,161 | £1,220 | £1,282 | £1,348 |
| 2% | £1,104 | £1,219 | £1,346 | £1,486 | £1,641 | £1,811 |
| 3% | £1,159 | £1,344 | £1,558 | £1,806 | £2,094 | £2,427 |
| 4% | £1,217 | £1,480 | £1,801 | £2,191 | £2,666 | £3,243 |
| 5% | £1,276 | £1,629 | £2,079 | £2,653 | £3,386 | £4,322 |
| 7% | £1,403 | £1,967 | £2,759 | £3,870 | £5,427 | £7,612 |
| 10% | £1,611 | £2,594 | £4,177 | £6,727 | £10,835 | £17,449 |
The 2% row is the target most central banks, including the Bank of England and the US Federal Reserve, aim for: even there, prices rise to £1,811 over 30 years. A run of 7% inflation takes only 10 years to push the same goods to £1,967.
How fast money loses buying power
The share of today's buying power that a fixed sum of cash keeps, and how many years it takes prices to double (ln 2 / ln(1 + r)). Cash that loses half its buying power has been through one doubling.
| Inflation | Prices double in | Kept after 10 years | Kept after 20 years | Kept after 30 years |
|---|---|---|---|---|
| 1% | 69.7 years | 90.5% (£905) | 82.0% (£820) | 74.2% (£742) |
| 2% | 35.0 years | 82.0% (£820) | 67.3% (£673) | 55.2% (£552) |
| 3% | 23.4 years | 74.4% (£744) | 55.4% (£554) | 41.2% (£412) |
| 4% | 17.7 years | 67.6% (£676) | 45.6% (£456) | 30.8% (£308) |
| 5% | 14.2 years | 61.4% (£614) | 37.7% (£377) | 23.1% (£231) |
| 7% | 10.2 years | 50.8% (£508) | 25.8% (£258) | 13.1% (£131) |
| 10% | 7.3 years | 38.6% (£386) | 14.9% (£149) | 5.7% (£57) |
The doubling column is the exact version of the Rule of 72, which the Rule of 72 guide explains as a shortcut for growth and for inflation alike.
Your real return after inflation
A savings rate only grows your buying power if it beats inflation. Each cell is the real annual return, (1 + savings rate) / (1 + inflation) - 1. Negative cells mean the balance rises but buys less every year.
| Savings rate | 2% inflation | 3% inflation | 4% inflation | 6% inflation |
|---|---|---|---|---|
| 1% | -0.98% | -1.94% | -2.88% | -4.72% |
| 2% | 0.00% | -0.97% | -1.92% | -3.77% |
| 3% | 0.98% | 0.00% | -0.96% | -2.83% |
| 4% | 1.96% | 0.97% | 0.00% | -1.89% |
| 5% | 2.94% | 1.94% | 0.96% | -0.94% |
| 7% | 4.90% | 3.88% | 2.88% | 0.94% |
Subtracting gives a close answer at low rates (5% minus 2% is 3% against an exact 2.94%), but the gap grows as rates rise. To see what a savings balance grows to before inflation, use the compound interest calculator, then run its result through this calculator to put it in today's money. The savings goal calculator works out how long a target takes with monthly deposits.
How the inflation calculation works
Inflation steadily raises prices, which means a fixed sum of money buys less over time. This calculator compounds an annual inflation rate over a number of years using the formula future value equals the amount times one plus the rate, raised to the power of the years. It then shows both the future cost of the same goods and how little today's amount would be worth in future money.
The two figures are mirror images. The equivalent future value tells you how much more you will need later to buy what the amount buys now, while the buying power figure shows the erosion in the opposite direction.
How to use the inflation calculator
- Enter an amount of money in today's terms.
- Set an annual inflation rate.
- Choose the number of years, then read the future equivalent value, the cumulative price rise and the future buying power.
Worked examples
1,000 at 3 percent inflation for 10 years
Inputs: Amount 1,000, rate 3 percent, 10 years.
Result: A future equivalent of about 1,343.92, a cumulative price increase of roughly 34.4 percent, and today's 1,000 worth only about 744.09 in future buying power.
A higher rate over the same period
Inputs: Amount 1,000, rate 5 percent, 10 years.
Result: The future equivalent climbs to about 1,628.89, showing how a couple of extra percentage points compounds sharply over a decade.
Limitations and common mistakes
Edge cases and limitations
- It assumes a single constant inflation rate for the whole period, whereas real inflation varies year to year.
- It does not account for any interest or investment return that might offset inflation on the money itself.
- Figures are shown to two decimal places, and the result is only as realistic as the rate you choose.
Common mistakes
- Using a one-off recent inflation spike as the long-run rate, which overstates the erosion. A long-run average of 2 to 3 percent is a more sensible planning figure.
- Confusing the future cost with the buying power. One rises with inflation while the other falls.
Frequently asked questions
How does this inflation calculator work?
It compounds inflation year on year using the formula future value equals amount times (1 plus rate) to the power of years. At 3 percent for 10 years, 1,000 today equals about 1,344 in future prices for the same basket of goods.
What inflation rate should I use?
Central banks often target around 2 percent, while long run averages tend to sit between 2 and 3 percent. For planning you can use the official target, a recent published rate, or a slightly higher figure to be cautious.
What is the difference between future cost and buying power?
Future cost shows how much more you will need to buy the same things later. Buying power shows the opposite view, how little today's fixed amount of money will purchase after inflation has eaten into it.
How much will £1,000 be worth in 20 years with inflation?
At 3% a year, £1,000 held as cash will buy what £553.68 buys today, and the same goods will cost £1,806.11. At 2% it keeps 67.3% of its buying power; at 5% only 37.7%.
How long does it take prices to double at 3% inflation?
23.4 years, from ln 2 / ln(1 + r). At 2% it takes 35.0 years and at 5% 14.2. The Rule of 72 (72 divided by the rate) gives 24.0 years at 3%, close enough for mental maths.
What is my real interest rate after inflation?
Divide rather than subtract: real rate = (1 + savings rate) / (1 + inflation) - 1. A 4% savings account during 3% inflation earns a real 0.97%, and 2% during 3% inflation is -0.97%, a loss of buying power even though the balance rises.
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