How it’s worked out
With prices rising at a rate r each year, they grow by a factor every year, compounded:
Future price = today’s price × (1 + r)^years Buying power = future amount ÷ (1 + r)^years
To bring an amount from years ago up to today, multiply by the same factor. The rate is yours to type: an average of past years from an official price index, or a guess for the future. Nothing is looked up.
Worked examples
At 3% a year for 10 years, prices rise by 34.4%: what costs 100 today costs 134.39. Turned round, 100 in ten years buys what 74.41 buys today, a loss of 25.6% of buying power. And 50 from 20 years ago, at an average 2.5%, is 81.93 in today’s money.
| Inflation a year | 1,000 costs in 10 years | 1,000 in 10 years buys | Buying power lost |
|---|---|---|---|
| 2% | 1,218.99 | 820.35 | 18% |
| 3% | 1,343.92 | 744.09 | 25.6% |
| 5% | 1,628.89 | 613.91 | 38.6% |
| 8% | 2,158.92 | 463.19 | 53.7% |
How to read the result
- Prices rise by: the total rise over the whole time, not per year.
- Buying power lost: how much less a fixed sum buys at the end.
- Years for prices to double: worked out exactly, with the rule of 72 (72 ÷ the rate) beside it as a quick check.
Common mistakes
- Adding the rates up instead of compounding: 3% for 10 years is a 34% rise, not 30%.
- Mixing up the two directions: a future price is bigger, a future amount’s buying power smaller.
- Using one year’s inflation for a long stretch: an average over many years is a steadier guide.
How to use it
- Choose Future prices, Buying power or From the past.
- Type the amount and the inflation rate a year.
- Type the number of years.
Questions
How much will 100 be worth in 10 years?
At 3% inflation a year, 100 in ten years’ time buys what 74.41 buys today.
How do I work out inflation over several years?
Multiply by (1 + the rate) once for every year, rather than adding the rates: at 3% for 10 years that is 1.03 to the power 10, a rise of 34.4%.
Where does the inflation rate come from?
You type it. For past years use the average from your country’s official consumer price index; for the future, a guess. The calculator never looks rates up.
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