Inflation Calculator

Calculate how inflation impacts purchasing power and future costs over any time period

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Year-by-Year Breakdown
Year Cost Then Purchasing Power Cumulative Inflation

Understanding Inflation and Its Impact on Your Money

Inflation is the gradual increase in the general price level of goods and services over time, which erodes the purchasing power of money. When inflation is 3% per year, something that costs $100 today will cost $103 next year, $106.09 the year after, and $134.39 in 10 years. This compounding effect means your savings lose real value every year they sit in a low-interest account. Understanding inflation is essential for retirement planning, investment decisions, salary negotiations, and long-term financial planning. The historical average inflation rate in the US has been approximately 3.2% since 1913, though it has varied dramatically from near 0% to over 14% (1980). Our calculator helps you project future costs, understand purchasing power erosion, and make informed financial decisions with a detailed year-by-year breakdown.

Frequently Asked Questions

What causes inflation?
Inflation is caused by: (1) Demand-pull when demand exceeds supply. (2) Cost-push when production costs rise (materials, labor, energy). (3) Monetary policy when central banks increase the money supply. (4) Expectations when people expect prices to rise and act accordingly.
How can I protect my money from inflation?
Invest in assets that historically outpace inflation: stocks (7-10% average return), real estate (3-5% appreciation + rental income), Treasury Inflation-Protected Securities (TIPS), I-Bonds, and commodities. Avoid holding large amounts in savings accounts with rates below inflation.
What is the Rule of 72?
The Rule of 72 is a quick way to estimate how long it takes for prices to double at a given inflation rate. Simply divide 72 by the inflation rate. At 3% inflation, prices double in approximately 24 years (72/3). At 6% inflation, they double in just 12 years.
Is deflation good for consumers?
While falling prices may seem beneficial, sustained deflation is generally harmful to the economy. It encourages consumers to delay purchases (expecting lower prices), reduces business revenue, can lead to wage cuts and unemployment, and makes debt more expensive in real terms.