Key takeaways
- Inflation compounds like interest.
- Real return ≈ nominal return − inflation.
- Cash loses purchasing power every year inflation is positive.
How the inflation calculator works
Inflation compounds just like interest. Prices rise by the inflation rate each year on top of last year's higher prices, so the value of money held as cash shrinks at the same compounding rate.
Formula
Standard formula. Further reading: U.S. Bureau of Labor Statistics – Consumer Price Index
Worked example
Something that costs $100 today at 3% inflation will cost 100 × 1.03^10 = $134.39 in 10 years.
Change any number above and the plain-English explanation updates instantly with your own figures.
Frequently asked questions
What is a normal inflation rate?
Many central banks, including the US Federal Reserve, target about 2% a year. Long-run US inflation has averaged around 3%.
How do I protect savings from inflation?
Earn a return above inflation, for example with diversified investments, I-bonds or TIPS in the US.
Is this based on actual CPI data?
No, it uses the constant rate you enter. For historical comparisons, use official CPI figures.
What is real return?
Your return minus inflation, approximately. A 7% return with 3% inflation is about a 4% real return.
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Results are estimates for educational purposes and are not financial advice.