See what inflation does to your money: the future cost of today's prices and how much purchasing power cash loses over time.
Inflation compounds just like interest, only against you. The future cost of something priced P today after t years at annual rate r is:
Future Cost = P × (1 + r ÷ 100)t
The flip side is purchasing power: the same formula in reverse shows what a fixed sum of cash will actually buy in the future. $10,000 held in cash at 3% inflation buys only what about $7,440 buys today after ten years.
Any return below the inflation rate is a real-terms loss. A savings account paying 1% while inflation runs at 3% loses roughly 2% of purchasing power per year. That's why long-term money is typically invested in assets that historically outpace inflation — you can model that growth with our compound interest calculator. If you're planning salary negotiations, compare your raise against the inflation rate: a 2% raise during 5% inflation is a pay cut in real terms.
Future cost = today's price × (1 + rate/100)^years. At 3% annual inflation, something costing $100 today will cost about $134 in 10 years and $181 in 20 years.
Most central banks, including the US Federal Reserve, target about 2% per year. The long-run US average is roughly 3%, with occasional spikes — 2022 reached 8-9%.
Cash loses purchasing power at the inflation rate. At 3% inflation, $10,000 kept in cash buys only what about $7,440 buys today after 10 years — which is why long-term savings are usually invested to outpace inflation.
No — it projects at whatever flat annual rate you enter, which is ideal for planning. Historical CPI lookups for specific years require official data from your national statistics agency (in the US, the Bureau of Labor Statistics).