How inflation changes the value of your money
Inflation is the general rise in prices over time. When prices go up, each dollar buys less, so the same amount of money has lower purchasing power in the future. This calculator compounds an annual inflation rate over the number of years you choose to show what an amount will cost later, or how much today's money will really be worth.
How the calculation works
Future cost = amount × (1 + inflation rate)years. For example, $1,000 with 3% annual inflation becomes about $1,344 after 10 years. Put the other way, $1,000 kept in cash for 10 years at 3% inflation buys what roughly $744 buys today.
Which inflation rate should I use?
In the United States, inflation is usually measured with the Consumer Price Index (CPI-U), published monthly by the Bureau of Labor Statistics. The Federal Reserve targets about 2% inflation over the long run. For long-term planning many people test 2%, 3% and 4% to see a range of outcomes.
Quick rule of thumb
Divide 72 by the inflation rate to estimate how many years it takes for prices to double. At 3% inflation, prices double in about 24 years; at 4%, in about 18 years.
Why it matters
Inflation affects savings, retirement income, salary negotiations and long-term goals such as college or a home. Comparing your savings or investment return with the inflation rate shows whether your money is actually growing in real terms.