Buying Power Calculator
What an amount of money is worth after inflation — in either direction, and what it would take to keep pace.
Inflation compounds like interest, in reverse.
How the buying power calculator works
Inflation compounds like interest, in reverse. An amount today buys 1/(1+i)ⁿ of what it does now after n years at rate i.
The figures are larger than intuition suggests. At 3% inflation, money halves in purchasing power in 23 years; at 7% it halves in 10. That is why "safe" cash holdings are not safe over long horizons.
Formula: future purchasing power = amount / (1 + i)ⁿ
Worked examples
| Inputs | Purchasing power | Note |
|---|---|---|
| 100,000 in 20 years at 3% | $55,367.58 | buys what 55,368 buys today |
| Looking backwards | $180,611.12 | 100,000 then is 180,611 now |
| Higher inflation | $25,841.90 | halves in a decade |
FAQFrequently asked questions
How much will my money be worth in 20 years?
At 3% inflation, about 55% of what it is worth now. At 5%, about 38%.
How long until money halves in value?
ln(2) divided by ln(1 + inflation). At 3% that is 23 years; at 7% just over 10.
Why is cash not safe?
Because it guarantees the nominal amount and nothing about what it buys. Over decades, inflation does more damage to cash than volatility does to a diversified portfolio.
Which inflation rate should I use?
Long-run averages sit around 2 to 3% in most developed economies, but your personal rate depends on what you actually buy.
Does this account for wage growth?
No. If your income rises with inflation the effect on you is smaller; on savings already held, it is exactly this.
Where these figures come from
- CFA Institute — Quantitative Methods: The Time Value of Money — the discounting, annuity and IRR conventions used here
- US Federal Reserve — Regulation Z (Truth in Lending), APR calculation — why APR includes fees where a nominal rate does not
- ASIC MoneySmart — the Australian regulator's own consumer calculators
Last checked: September 2026. These are the standard textbook formulas; the conventions named are those of the CFA Institute curriculum and ISO 80000 usage.