How this inflation calculator works
Inflation is the steady rise in prices, which reduces what each dollar can buy. If prices rise by a constant rate each year, an item that costs a certain amount today will cost that amount × (1 + rate) raised to the number of years later. The calculator applies this formula in three ways.
Future price shows what something you buy today will cost after a number of years. Purchasing power shows what a sum of money will be worth in today's dollars. Find the rate works backward from two prices to give the average annual inflation rate between them.
Why inflation matters
At 3% inflation, prices double roughly every 24 years, and $1,000 will only buy about $744 worth of goods in 10 years. This is why money kept in cash slowly loses value, and why savings and investments need to earn more than inflation to grow your real wealth.
Using the results
- Use 2–3% for long-term planning. The Federal Reserve targets 2%, and the long-run US average is a little higher.
- Compare returns to inflation. A 4% savings rate with 3% inflation grows your buying power by only about 1% a year.
- Plan big purchases early. College, healthcare and housing often rise faster than general inflation.
- Try different rates. A change of one percentage point makes a large difference over 20 or 30 years.
Frequently asked questions
How do you calculate inflation?
Divide the later price by the earlier price and subtract 1 to get total inflation. To find the average annual rate, take that ratio to the power of 1 divided by the number of years, and subtract 1.
What is purchasing power?
It's the amount of goods and services a sum of money can buy. When prices rise, the same dollars buy less, so purchasing power falls.
Why is my result different from official CPI numbers?
This calculator assumes one steady annual rate that you choose. Real inflation changes from year to year, so use it for estimates and planning, and check official CPI data for exact historical comparisons.
Can inflation be negative?
Yes — falling prices are called deflation. You can enter a negative rate to see the effect.
What inflation rate should I use?
Around 2–3% is a common planning assumption. Use a higher rate for categories like healthcare or tuition that have historically outpaced overall inflation.
This calculator is for general informational purposes only. It uses a constant inflation rate and does not predict actual future prices.