How it works
Inflation is the general rise in prices over time. At 3% a year, something that costs $100 today costs about $134 in ten years, and $100 kept in cash buys only about $74 worth of today's goods.
This calculator uses a single average rate you enter rather than historical CPI data, so it works for planning future costs. Actual inflation varies year to year.
Formula
Future cost = amount × (1 + i)^years; buying power = amount ÷ (1 + i)^years
Questions people ask
What inflation rate should I use?
The US Consumer Price Index has averaged roughly 3% a year over the past century. The Federal Reserve targets 2%. Use a higher rate for categories like health care or college costs that have risen faster.
How does inflation affect savings?
If your savings earn less than inflation, their buying power shrinks. A 4% savings rate with 3% inflation is about a 1% real return.
What is the difference between nominal and real dollars?
Nominal dollars are the face amount in a given year. Real (inflation-adjusted) dollars express that amount in today's buying power.