📊 Inflation Impact Calculator
See how inflation erodes the value of money over time — and what it means for your savings.
See how inflation erodes the value of money over time — and what it means for your savings.
How does inflation affect savings?
Inflation erodes the real (purchasing) value of money over time. At 3% annual inflation, $100 today has the same buying power as about $74 in 10 years and $55 in 20 years. To preserve real wealth, your investments must return at least the inflation rate; to grow real wealth they must exceed it.
| Year | Future Price | Purchasing Power | Value Lost |
|---|
How to use this calculator
Takes about 1 minute.
- Enter the current amount of money you want to project
- Set an annual inflation rate (USA ~3%, UK ~2.5%, South Africa ~5% long-run averages)
- Pick the number of years over which to apply the inflation effect
- Click Calculate to see the future cost of the same goods and the lost purchasing power
- Review the year-by-year breakdown to see how the erosion compounds
Try these scenarios
Tap a scenario to load it into the calculator above.
Key concepts
What inflation does. Inflation is the steady erosion of money's purchasing power. At 3% annual inflation, $100 today buys what $74 buys in 10 years and $55 in 20 years. The calculator runs this in reverse: it shows what your future amount is worth in today's dollars.
How it's measured. Headline inflation is the Consumer Price Index (CPI) — a basket of typical household spending. The U.S. BLS, UK ONS, and Stats SA all publish monthly CPI figures. 'Core' inflation strips out volatile food and energy.
Personal inflation differs. Your actual inflation depends on what you buy. Healthcare and college tuition have outpaced headline CPI in the US for decades. Tech goods often fall in price.
Inflation hedges. Historically, stocks, Treasury Inflation-Protected Securities (TIPS), and inflation-linked gilts have kept pace with inflation over long horizons. Cash and nominal bonds lose purchasing power when inflation exceeds their yield.
Long-term averages. The US has averaged about 3% CPI inflation since 1913. The UK averaged 2-3% post-1992 (since inflation targeting). South Africa has run 5-6% over the past two decades. Use a regional average, not the headline of any single year.
UK-specific: RPI vs CPI. The UK Retail Price Index (RPI) typically runs 0.5-1.5 ppts higher than CPI due to formula differences (Carli vs Jevons). RPI is still used for index-linked gilts, some legacy pensions, and Plan 1 student loans. Our UK RPI inflation calculator converts amounts across any year 1947 to today using ONS-published annual averages.
Frequently Asked Questions
Worked example — R500,000 retirement savings in South Africa over 25 years
Picture a 40-year-old in Cape Town with R500,000 already saved towards retirement. South African CPI has averaged roughly 5% over the past two decades according to Stats SA's headline CPI series, comfortably inside the SARB target band of 3–6%. The question this calculator answers is: what does R500,000 today actually buy in 25 years, if prices keep rising at the long-run average?
The formula is straightforward. Future nominal cost of the same basket is amount × (1+i)^years, where i is the inflation rate. Purchasing power in today's rands of that future amount is amount ÷ (1+i)^years. Plugging in R500,000 at 5% over 25 years: the future nominal cost of what R500,000 buys today rises to R500,000 × (1.05)^25 = R1,693,177. Looked at the other way, R500,000 in 25 years' time buys what R500,000 ÷ (1.05)^25 = R147,700 buys today. That is the lost purchasing power: R352,300, or just over 70% of the original real value gone to inflation.
The interpretation matters for anyone planning South African retirement. A 5% CPI plus a typical 2.5% real-return target means a balanced portfolio inside an RA or TFSA needs to earn roughly 7.5% nominal just to keep pace plus a small real gain. Cash sitting in a 32-day notice account paying 8% feels generous but delivers only about 3% real — better than nothing, but not enough to grow a retirement pot meaningfully. Shift the inflation assumption to 6% (the top of SARB's band) and the same R500,000 falls to R116,500 of today's purchasing power over 25 years. Small differences in the inflation assumption swing the answer by hundreds of thousands.
Common inflation-planning mistakes
- Confusing nominal and real returns. An investment quoting 8% per year against 5% inflation is delivering only 3% real growth. Planning retirement with the 8% headline number and ignoring the inflation drag systematically overstates the future pot's purchasing power. Always subtract inflation before projecting more than five years out.
- Anchoring on a single recent year. 2022 felt like 8% inflation everywhere; 2020 felt like 1%. Neither is the long-run number. Use 30-year averages — roughly 3% USA, 2.5% UK, 5% South Africa — plus a small buffer for conservatism. The Bank of England and SARB both publish historical CPI series for reference.
- Forgetting that headline CPI is not personal inflation. The basket weights housing, food, transport, healthcare, and entertainment by national averages. If half your spending is rent and rents in your city are rising 8% while headline CPI is 3%, your personal inflation rate is materially higher. Use the calculator with your own estimate when the standard basket does not match your reality.
- Ignoring tax on nominal gains. Many tax systems tax nominal interest and gains, not real ones. Earning 5% interest with 3% inflation means a 2% real return, but you pay tax on the full 5% — so post-tax real returns can be near zero or negative. Tax wrappers (ISA, Roth IRA, TFSA) avoid this problem and matter most when inflation is high.
- Assuming wages keep pace automatically. Real wages have been roughly flat in the UK for over a decade according to ONS data, and have lagged inflation in many years in the US and SA. Counting on salary increases to neutralise inflation is risky for long-term planning — build the inflation cushion into the savings rate instead.
How to read the results
The calculator gives two parallel views of the same problem. "Future cost" shows what something priced at the amount today will cost in nominal terms after the chosen number of years — useful for projecting things like university fees or replacement-car prices. "Purchasing power" runs the opposite direction: it shows what a fixed nominal amount in the future is worth in today's pounds, dollars, or rands. Use the future-cost view when planning to buy something in the future; use the purchasing-power view when projecting savings or pension pots already in motion.
The "lost purchasing power" figure is the gap between the original amount and the purchasing-power view. It is the most concrete number on the page because it expresses inflation as money rather than a percentage. Pair it with whatever your investments are earning: if real net return after fees and tax is positive, the pot grows in purchasing-power terms despite the loss shown here. If it is negative — common for cash in low-yield accounts — the calculator is showing you exactly how much real value the cash position is bleeding each year.
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