Buying Power Calculator — Purchasing Power & Inflation Erosion
Understand what inflation does to your money: enter an amount, an annual inflation rate, and a time horizon to see its real purchasing power in the future, how much buying power is lost, and how much you would need to maintain the same standard of living.
%
years
What today's amount buys in future money — adjusted for cumulative inflation
- 1
Annual inflation rate as decimal
r = 3% ÷ 100 = 0.03 - 2
Cumulative inflation factor
(1 + 0.03)^20 = 1.8061How many times more expensive goods are after the full period. - 3
Real value after inflation
10,000 ÷ 1.8061 = 5,536.76
How does this calculator work?
Real Value = Amount ÷ (1 + r)^t. At 3% annual inflation, £10,000 retains only £5,537 of purchasing power after 20 years — you would need £18,061 to buy the same goods. Enter your amount, expected inflation rate, and time horizon to see the erosion curve.
Formula
How this is calculated
Inflation erodes the purchasing power of money over time — the same number of currency units buys progressively less as prices rise. If inflation averages 3% per year, £10,000 today has the real purchasing power of only £5,537 in 20 years — because prices will be about 81% higher, meaning you need roughly £18,061 to buy what £10,000 buys today.
The real value formula divides the original amount by the cumulative inflation factor (1 + r)^t, where r is the annual rate and t is the number of years. The "future equivalent" — the amount you would need in the future to match today's purchasing power — is the reverse: multiply by the same factor. The difference between these two numbers is the purchasing power destroyed by inflation.
Inflation rates are historical averages and vary by country, time period, and basket of goods measured. The calculator uses a single constant annual rate as an approximation — real inflation fluctuates year to year. As of 2025, historical long-run averages commonly cited are around 2–3.5% for developed economies. Enter any rate that applies to your situation; the rate used is clearly an assumption, not a prediction.
Frequently asked questions
Long-run averages for developed economies are typically 2–3.5% (e.g. US CPI average is roughly 3% over the past century; Eurozone target is 2%). For planning purposes, 2.5–3% is a common conservative assumption. For hyperinflationary economies, use a country-specific rate.
Real value shows what your original amount is worth in future purchasing power — it shrinks with inflation. Future equivalent shows how many future dollars/euros you would need to buy the same things — it grows with inflation. Both start from the same amount; one divides and one multiplies by the inflation factor.
Keep money in assets that historically return above inflation, such as equities, inflation-linked bonds (TIPS/I-bonds), real estate, or high-yield savings accounts. Money sitting in low-interest accounts loses real purchasing power every year it earns less than the inflation rate.
TG we-Calculate Editorial Team. (2026). Buying Power Calculator — Purchasing Power & Inflation Erosion [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/buying-power-calculator
TG we-Calculate Editorial Team. "Buying Power Calculator — Purchasing Power & Inflation Erosion." TG we-Calculate. 2026. https://we-calculate.com/calculator/buying-power-calculator.
TG we-Calculate Editorial Team, "Buying Power Calculator — Purchasing Power & Inflation Erosion," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/buying-power-calculator
@misc{wecalculate_buying_power_calculator, title = {Buying Power Calculator — Purchasing Power & Inflation Erosion}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/buying-power-calculator}}, year = {2026}, note = {TG we-Calculate} }
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