Inflation quietly erodes the purchasing power of money over time — the same dollar buys less each year. This calculator shows how prices change across time so you can understand what past amounts are worth today, or how much future costs may rise.
How inflation is measured
Inflation is tracked using price indexes like the Consumer Price Index (CPI), which measures the average change in prices for a basket of goods and services. An annual inflation rate of 3% means that, on average, things cost 3% more than they did a year earlier, so your money loses about 3% of its buying power.
The long-term effect of compounding inflation
Like investment returns, inflation compounds. At 3% a year, prices roughly double every 24 years. This is why $50,000 sounds like a comfortable income today but would have felt like wealth decades ago — and why planning for retirement decades away requires accounting for a much higher cost of living than you experience now.
A worked example
At an average 3% inflation rate, something that costs $100 today would cost about $134 in ten years and roughly $181 in twenty. Looking backward, $100 twenty years ago had the purchasing power of about $170 today — which is why comparing salaries or prices across decades requires adjusting for inflation.
Protecting your money from inflation
- Keep long-term savings invested rather than in cash, since investments have historically outpaced inflation.
- When planning future goals, inflate the target amount so you save enough in tomorrow's dollars.
- Cash in a checking account or low-yield savings loses real value every year — a high-yield account at least partly offsets it.
- Factor inflation into retirement planning; a fixed income that seems generous now will buy far less in 20 or 30 years.