Inflation Calculator
Calculate the impact of inflation on your money's purchasing power over time with our free inflation calculator tool.
Calculate Inflation Impact
Results
Value of $1,000.00 in 1990 is worth
$1,832.64
in 2023
Cumulative Inflation
83.26%
Inflation Per Year (Avg)
2.5%
Buying Power
$545.66 (54.57% of original)
Enter your values and click "Calculate" to see the results
Value Over Time
Understanding Inflation
What is Inflation?
Inflation is the rate at which the general level of prices for goods and services rises, causing purchasing power to fall. Central banks try to limit inflation and avoid deflation to keep the economy running smoothly.
When prices rise, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.
How Inflation Affects You
Inflation impacts your daily life in various ways:
- Your money loses value over time, reducing your purchasing power
- Fixed income investments may not keep pace with inflation
- Cost of goods and services increase regularly
- Long-term financial planning becomes more complex
- Savings need to grow at a rate higher than inflation to maintain real value
Historical Inflation Rates
| Time Period | Average Annual Inflation Rate | Notable Events |
|---|---|---|
| 1900-1910 | 2.12% | Early industrialization period |
| 1910-1920 | 8.02% | World War I and its aftermath |
| 1920-1930 | -2.08% | Post-war deflation and Great Depression |
| 1930-1940 | 2.01% | New Deal and economic recovery |
| 1940-1950 | 5.52% | World War II and post-war boom |
| 1950-1960 | 2.22% | Post-war economic expansion |
| 1960-1970 | 2.54% | Vietnam War spending |
| 1970-1980 | 7.36% | Oil crisis and stagflation |
| 1980-1990 | 5.82% | Federal Reserve monetary policy |
| 1990-2000 | 2.93% | Technology boom and economic growth |
| 2000-2010 | 2.54% | Dot-com bubble burst and financial crisis |
| 2010-2020 | 1.78% | Post-financial crisis recovery |
| 2020-2023 | 5.37% | COVID-19 pandemic and supply chain disruptions |
Data source: Historical inflation data based on Consumer Price Index (CPI)
Sample Inflation Calculations
College Education
A college education that cost $20,000 in 1990 would cost approximately $43,395 in 2023.
That's a 117% increase over 33 years.
Housing
A house that cost $100,000 in 1980 would cost approximately $355,349 in 2023.
That's a 255% increase over 43 years.
Retirement Planning
To maintain the equivalent of a $50,000 retirement income in 2023, you would need about $82,813 in 2043 (assuming 2.5% annual inflation).
That's a 65.6% increase over 20 years.
Food Expenses
A grocery bill of $200 per week in 2013 would cost approximately $259 in 2023.
That's a 29.5% increase over 10 years.
Frequently Asked Questions
What exactly does an inflation calculator do?
An inflation calculator determines the changing value of money over time by showing how much a specific amount from the past would be worth today, or how much today's money might be worth in the future. It helps illustrate the impact of inflation on purchasing power over time.
How is inflation calculated?
Inflation is typically measured using price indexes. The most common is the Consumer Price Index (CPI), which tracks the weighted average price of a basket of goods and services over time. The inflation rate is the percentage change in the CPI over a specific period.
The formula for calculating the future value adjusted for inflation is:
Future Value = Present Value × (1 + Inflation Rate) ^ Number of Years
What causes inflation?
There are several causes of inflation:
- Demand-Pull Inflation: When demand for goods and services exceeds available supply
- Cost-Push Inflation: When production costs increase, pushing up prices
- Monetary Inflation: Caused by an expansion in money supply
- Built-In Inflation: Results from adaptive expectations, where future inflation is based on previous experience
Other factors include government policies, international events, supply chain disruptions, and wage increases.
How can I protect my money from inflation?
Several strategies can help protect your money from inflation:
- Invest in stocks: Historically, stocks have provided returns that outpace inflation
- Consider real estate: Property values and rental income often rise with inflation
- Invest in TIPS: Treasury Inflation-Protected Securities adjust with inflation
- Diversify investments: Spread risk across different asset classes
- Consider I Bonds: Government savings bonds with rates that adjust for inflation
- Invest in commodities: Physical goods like gold often serve as inflation hedges
The key is to ensure your money grows at a rate higher than the inflation rate to maintain or increase your purchasing power over time.
Is some inflation good for the economy?
Yes, most economists and central banks consider a modest level of inflation (typically around 2%) beneficial for the economy for several reasons:
- It encourages spending and investment rather than holding cash
- It gives central banks room to lower interest rates during economic downturns
- It helps prevent deflation, which can lead to decreased spending and economic stagnation
- It provides flexibility for employers to adjust real wages without nominal wage cuts
However, high or unpredictable inflation can be harmful, creating economic uncertainty and reducing purchasing power too rapidly.