How this calculator works
Inflation is the rate at which prices rise and money's purchasing power falls over time. This calculator works in two directions: it can project what an amount today will cost in the future at a given inflation rate, or discount a future amount back to show what it is worth in today's buying power.
You choose the inflation rate, since actual inflation varies widely by country and by year and cannot be predicted with certainty. A commonly cited example is that many developed-economy central banks have targeted roughly 2-3% annual inflation as a long-run policy goal, but this is only an example assumption, not a guarantee of future rates, and historical inflation has often been higher or lower.
The formula
Future cost = Amount × (1 + rate)^yearsToday's buying power = Future amount ÷ (1 + rate)^yearsBoth formulas use the same compounding relationship in opposite directions: one projects forward, the other discounts back, so applying both to the same amount and rate returns the original number.
Worked example: $1,000 at 3% inflation over 10 years
- Future cost: $1,000 × (1.03)^10 ≈ $1,343.92 — what today's $1,000 worth of goods would cost in 10 years.
- Buying power: $1,000 ÷ (1.03)^10 ≈ $744.09 — what $1,000 received in 10 years would be worth in today's money.
- Checking the round trip: taking the future cost of $1,343.92 and discounting it back over the same 10 years at 3% returns the original $1,000.
Frequently asked questions
What inflation rate should I use to project future costs or buying power?
Use your own assumption based on recent inflation data for your country or the specific goods you care about, since rates vary significantly over time and by region. This calculator does not assume any single official rate.
Why did you mention 2-3% inflation?
That range is a commonly cited example of the long-run inflation target used by several major central banks, shown here only as an illustration. It is not a prediction, a guarantee, or the actual historical average for any specific country or period.
What is the difference between nominal and real value?
Nominal value is the raw dollar amount; real value adjusts for inflation to reflect actual buying power. The buying-power mode of this calculator converts a nominal future amount into its real value in today's dollars.
Does inflation affect all prices equally?
No. Overall inflation is typically measured as a basket-wide average, such as a consumer price index, while individual goods and services can rise or fall at very different rates from that average.
Can I use this calculator to model deflation instead of inflation?
Yes. Enter a negative number for the rate, and the same formula — Future cost = Amount × (1 + rate)^years — still applies: with a negative rate, (1 + rate) is less than 1, so the projected future cost falls instead of rising, and the buying-power calculation correspondingly shows a higher value in today's terms. This models deflation, the opposite of inflation, using the identical math.