Inflation Impact Calculator

How to calculate the impact of inflation?

Inflation measures the rate at which the general level of prices for goods and services is rising and, subsequently, purchasing power is falling.

Formula: Future Value = PV × (1 + i)ⁿ

Using the Inflation Impact calculator: an example

If you have $1,000 today and the inflation rate is 3% per year for 10 years:

Step-by-step calculation:

• Identify the principal amount ($1,000)
• Apply the annual compounding rate (1.03)
• Raise the rate to the power of 10 years
• Multiply the result by the principal to get $1,343.92

Frequently Asked Questions

Why is inflation important for long-term planning?
It is vital for maintaining your lifestyle in retirement, as inflation reduces the purchasing power of your money over long periods.

What is a typical inflation rate?
Most central bank targets are usually set around 2% per year to ensure economic stability and growth.

How does inflation affect savings?
Inflation reduces the value of your savings by lowering the real interest rates; if inflation exceeds your interest earnings, your real wealth decreases.