What is a good inflation rate?

Most central banks target around 2% annual inflation, which is considered healthy for economic growth. Below 2% risks deflation, while above 4-5% starts to seriously erode purchasing power and destabilise the economy.

How does inflation affect my savings?

If your savings earn less interest than the inflation rate, your money loses real value over time. For example, at 3% inflation, $10,000 in savings has the purchasing power of only $7,374 after 10 years if it earns no interest.

What's the difference between future cost and purchasing power?

Future cost shows what something that costs a given amount today will cost in the future. Purchasing power shows what your current money will be worth in real terms — how much less it can buy after inflation.

How can I protect against inflation?

Common inflation hedges include investing in stocks, real estate, Treasury Inflation-Protected Securities (TIPS), commodities, and I-bonds. The key is ensuring your returns consistently exceed the inflation rate.

Inflation Calculator – Measure Purchasing Power Over Time

Free inflation calculator to see how inflation erodes purchasing power. Calculate future costs, real value of money, and total inflation impact over any time period.

Last updated: 2026-03-07

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Understanding Inflation

Inflation is the rate at which the general level of prices for goods and services rises over time, eroding purchasing power. A dollar today buys less tomorrow.

How This Calculator Works

Future Cost = Current Amount × (1 + Inflation Rate)^Years — shows what today's goods will cost in the future. Purchasing Power = Current Amount ÷ (1 + Inflation Rate)^Years — shows what your money will be worth after inflation.

Historical Inflation Rates

US Average (1913–2023): ~3.2% annually
Low Inflation Era (2010–2020): ~1.7% annually
High Inflation (2021–2023): 5–9% annually
Federal Reserve Target: 2% annually

Why It Matters

Understanding inflation is crucial for retirement planning, salary negotiations, investment decisions, and long-term financial goals. Money sitting in a savings account earning below the inflation rate is effectively losing value.

Frequently Asked Questions

What is a good inflation rate?: Most central banks target around 2% annual inflation, which is considered healthy for economic growth. Below 2% risks deflation, while above 4-5% starts to seriously erode purchasing power and destabilise the economy.
How does inflation affect my savings?: If your savings earn less interest than the inflation rate, your money loses real value over time. For example, at 3% inflation, $10,000 in savings has the purchasing power of only $7,374 after 10 years if it earns no interest.
What's the difference between future cost and purchasing power?: Future cost shows what something that costs a given amount today will cost in the future. Purchasing power shows what your current money will be worth in real terms — how much less it can buy after inflation.
How can I protect against inflation?: Common inflation hedges include investing in stocks, real estate, Treasury Inflation-Protected Securities (TIPS), commodities, and I-bonds. The key is ensuring your returns consistently exceed the inflation rate.

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Inflation quietly erodes your savings every year. Bookmark this calculator and factor inflation into every financial decision.

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Disclaimer

Calculations are estimates for informational purposes only and do not constitute financial advice. Consult a qualified financial professional before making financial decisions.

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