Inflation Calculator
See both sides of inflation at once: what today's money will cost in the future, and what future money is worth today.
Central banks typically target 2%
Year-by-year impact
| Year | Future cost of today's basket | Purchasing power of the amount |
|---|---|---|
| 1 | £10,300.00 | £9,708.74 |
| 2 | £10,609.00 | £9,425.96 |
| 3 | £10,927.27 | £9,151.42 |
| 4 | £11,255.09 | £8,884.87 |
| 5 | £11,592.74 | £8,626.09 |
| 6 | £11,940.52 | £8,374.84 |
| 7 | £12,298.74 | £8,130.92 |
| 8 | £12,667.70 | £7,894.09 |
| 9 | £13,047.73 | £7,664.17 |
| 10 | £13,439.16 | £7,440.94 |
How inflation compounds
Inflation applies the same compound-growth mathematics as interest: future cost = amount × (1 + rate)years. Small rates compound into big effects — at just 3%, prices double roughly every 24 years. Purchasing power runs the formula in reverse, which is why a fixed sum promised far in the future is worth much less than it sounds.
This calculator uses a constant assumed rate. Historical CPI-based calculations (UK CPI, US CPI, euro-area HICP) are on the roadmap.
Frequently asked questions
How does inflation reduce the value of money?
Inflation compounds just like interest, but against you. At 3% a year, what costs £10,000 today costs £18,061 in 20 years — and £10,000 received in 20 years buys only what £5,537 buys today, a 45% loss of purchasing power.
What inflation rate should I assume?
The Bank of England, US Federal Reserve, and European Central Bank all target around 2%, but actual rates vary — UK CPI peaked above 11% in 2022. Long-term planning commonly assumes 2–3%; use a higher figure to stress-test your plans.
How is the future cost calculated?
Future cost = amount × (1 + rate)^years, the same compound growth formula used for interest. Purchasing power works in reverse: amount ÷ (1 + rate)^years. Both are shown year by year in the table.
Why does inflation matter for savings?
If your savings earn less than inflation, you're losing purchasing power even as the balance grows. Cash earning 2% during 4% inflation shrinks by roughly 2% a year in real terms — which is why long-term money is often invested rather than held in cash.