Inflation & Purchasing Power Calculator
Calculate how inflation erodes purchasing power over time, or find what a past price equals today. Use any inflation rate and see year-by-year progression.
What is inflation?
Inflation is the rate at which the general price level of goods and services increases over time, resulting in a decrease in purchasing power. When inflation is 3% per year, $100 today will only buy what $97 buys next year — or equivalently, you will need $103 next year to purchase what $100 buys today.
Most central banks (the Federal Reserve, Bank of England, European Central Bank) target 2% annual inflation as a balance between price stability and economic growth. Actual inflation fluctuates based on energy prices, supply chain conditions, monetary policy, and demand.
The rule of 72
A useful shortcut: divide 72 by the annual inflation rate to estimate how many years it takes for prices to double — or equivalently, how many years until your money's purchasing power is halved.
- At 2% inflation: purchasing power halves in ~36 years
- At 3% inflation: purchasing power halves in ~24 years
- At 7% inflation: purchasing power halves in ~10 years
- At 10% inflation: purchasing power halves in ~7 years
Frequently asked questions
How does inflation affect savings?
Cash savings erode in real terms whenever the inflation rate exceeds the interest rate you earn. If your savings account pays 2% but inflation is 4%, your real return is −2% per year — your money buys less over time even as the nominal balance grows. This is why holding cash long-term is often considered a losing strategy in inflationary environments.
What rate should I use?
For US dollar calculations, the long-run average CPI inflation is approximately 3% since 1914. The last 30 years have averaged closer to 2.5%. UK long-run inflation averages around 3%. For conservative long-term financial planning, 3% is a reasonable assumption; 2% is optimistic and may reflect current central bank targets.
Does this calculator use actual historical CPI data?
No — this calculator uses a fixed annual rate that you enter, not actual historical CPI data. For exact historical comparisons (e.g., what did $100 in 1970 buy?), official CPI calculators from the Bureau of Labor Statistics or Office for National Statistics use the actual measured inflation for each year.
