The Inflation Impact Calculator shows how inflation quietly eats into the buying power of money you hold. Enter an amount, an annual inflation rate and a time horizon, and it reveals what today’s money will really be worth in the future — and how much you’d need to keep pace.
How inflation compounds over time
Inflation is multiplicative, not additive. It applies to a growing price level each year, which means even a seemingly modest rate produces surprisingly large erosion over longer periods. The formula for real value is:
real value = amount ÷ (1 + rate)^years
To illustrate with a few rate and time combinations:
| Rate | 5 years | 10 years | 20 years |
|---|---|---|---|
| 2% | 90.6% of today’s value | 82.0% | 67.3% |
| 3% | 86.3% | 74.4% | 55.4% |
| 5% | 78.4% | 61.4% | 37.7% |
| 7% | 71.3% | 50.8% | 25.8% |
A 3% annual rate — often cited as a reasonable long-run average — cuts purchasing power nearly in half over 24 years (the classic Rule of 72: divide 72 by the rate to get the approximate doubling time, which at 3% is about 24 years for prices to double, meaning purchasing power halves).
Two views the calculator gives you
- Real value — what today’s money will actually buy in the future, in today’s terms. This is the shrinkage view.
- Amount needed —
amount × (1 + rate)^years— how much you would need in nominal terms in the future to match today’s purchasing power. This is the growth-target view, useful for savings goals.
For example: a savings goal of £10,000 worth of purchasing power in 15 years at 3% inflation means you actually need about £15,580 in future pounds — £5,580 more than the figure feels like today.
Practical uses
Emergency fund planning: A £5,000 emergency fund that sits untouched in a zero-interest account loses real value continuously. At 3% inflation, it is worth about £3,720 in today’s terms after 10 years.
Pension and retirement planning: Fixed incomes and lump sums shrink in real terms. Someone retiring on £2,000/month who does not get inflation-linked increases will be receiving the equivalent of roughly £1,110/month in today’s purchasing power after 20 years at 3% inflation.
Comparing savings rates: If your savings account pays 1.5% and inflation is 3%, you are losing 1.5% of real purchasing power every year. The calculator makes this concrete — enter the account balance, the real return (or 0% for a non-interest account), and your time horizon.
Notes
This calculator shows the effect of a constant annual inflation rate. Real inflation fluctuates and varies by country and spending basket. Try several scenarios with different rates to understand the range of outcomes. All calculations run locally in your browser.