Calculator
Inflation Impact Calculator
See what your money today will really be worth in years to come — and how much you'd need just to stand still. Adjust the inflation rate and watch the picture change.
Your money
Used for the chart below. The cards always show 5, 10 and 20 years.
Inflation reduces what £1 buys. A 3% annual rate doubles prices in roughly 24 years — and halves the purchasing power of money sitting in cash.
Purchasing power over time
Estimates assume a constant annual inflation rate. Real-world inflation varies year to year — UK CPI averaged about 2.8% over the past 30 years, but reached 11% in 2022.
How the inflation calculator works
Inflation is the silent erosion of purchasing power: the same money buys less stuff over time. This calculator shows two sides of that coin — what your savings will be worth in real terms in the future, and how much income you'd need each year to keep buying the same basket of goods.
The formula
Real future value (today's money): FV = PV / (1 + i)^t
Nominal income needed (to keep buying power): Needed = PV × (1 + i)^t
Where PV is today's amount, i is the annual inflation rate (as a decimal), and t is the number of years.
Worked example
Scenario: £50,000 today, 3% annual inflation, 20-year horizon.
Real value of £50,000 in 20 years: £50,000 ÷ (1.03)^20 ≈ £27,684 in today's money.
Nominal amount needed in 20 years to match today's £50,000: £50,000 × (1.03)^20 ≈ £90,306.
Bump inflation to 5% and the real value drops to ~£18,844, while the income needed jumps to ~£132,665.
Frequently asked questions
What is inflation?
Inflation is the rate at which the general level of prices is rising. If inflation is 3% per year, a basket of goods that costs £100 today costs £103 in a year — meaning the same £100 buys 3% less.
How is the future value of money calculated?
The real (inflation-adjusted) value of money in t years is FV = PV / (1 + i)^t, where PV is today's amount and i is the annual inflation rate. To find the nominal income needed to match today's purchasing power, you flip the formula: Needed = PV × (1 + i)^t.
What is a 'good' rate of inflation?
Most central banks (Bank of England, US Federal Reserve, ECB) target around 2% per year. That's seen as low enough not to distort decisions but high enough to avoid deflation, which can stall an economy. Sustained periods above 4-5% start to erode savings significantly.
How can I protect my money from inflation?
Cash sitting in a low-rate account loses real value when inflation outpaces interest. Long-term, equities, property, index-linked gilts (UK) or TIPS (US), and to some extent commodities have historically tracked or beaten inflation. The trade-off is short-term volatility.
Why does my pay rise feel like a pay cut?
Because the real value of a pay rise is the nominal rise minus inflation. A 3% raise in a 6% inflation year is effectively a 3% pay cut in real purchasing power.
Should I use 2%, 3%, or higher in my plan?
Long-run UK and US averages have been roughly 2-3% per year, but individual decades vary widely (the 1970s averaged 8%+, the 2010s well under 2%). Stress-test your plan at both 3% and 5% to see how sensitive your numbers are.