Inflation Calculator

What this tool does

The Inflation Calculator applies a constant yearly inflation rate to project future costs or discount a future amount back to today’s purchasing power. A third mode finds the average annual inflation implied by an old and a new price, with a year-by-year table.

Inflation is the gradual rise in prices that reduces what each unit of money can buy. At 6% a year prices double in about 12 years, so a goal that costs 1 lakh today will cost close to 1.8 lakh in a decade. Ignoring this is one of the most common planning errors, whether you are saving for education, a house or retirement, or judging what a pension or maturity amount will really be worth.

The calculator uses compound growth. Future cost = amount × (1 + i)^n and real value = amount ÷ (1 + i)^n, where i is the yearly inflation rate and n the number of years. In the third mode it reverses the formula, i = (later price ÷ earlier price)^(1/n) − 1, to give the average rate between two prices. It also reports how long it takes for prices to double at the chosen rate.

How to use Inflation Calculator

1. Choose what to calculate: future cost, today’s value of a future amount, or the average inflation rate.
2. Pick a currency for formatting.
3. Enter the amount, or for the rate mode the starting price and the later price.
4. Enter the inflation rate per year, for example 6 for 6%.
5. Enter the number of years.
6. Read the result and use the chart and year-by-year table to see the effect over time.

Tips for better results

• Use a higher rate for education and medical goals, which have often outpaced general consumer inflation.
• Compare investment returns with inflation; a 7% deposit during 6% inflation grows real wealth by only about 1% a year before tax.
• Divide 70 by the inflation rate for a quick estimate of the years it takes prices to double.

Common use cases

• Estimating the future cost of a child’s college education.
• Converting a pension or insurance maturity amount into today’s money.
• Working out how much rent or a product price has risen per year.
• Setting salary-increase expectations against the cost of living.

Common mistakes to avoid

• Applying simple growth (amount × rate × years) instead of compounding.
• Using one national inflation figure for every goal regardless of category.
• Comparing nominal returns with goals that are expressed in today’s prices.