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Inflation Calculator
See how inflation erodes the purchasing power of your money over time.
Purchasing Power Erosion
See exactly how much value your money loses
Custom Inflation Rate
Use any rate — historical average or current CPI
Dual-Line Chart
Nominal cost vs purchasing power visualised
Calculate Inflation Impact
See how inflation erodes the purchasing power of your money over time.
How Inflation Erodes Purchasing Power
The Inflation Formula
CPI (Consumer Price Index) measures a basket of goods and services. When the CPI rises, each pound buys less. At 3% inflation, £100 today buys only £74 worth of goods in 10 years — a 26% loss in real purchasing power.
Real vs Nominal Values
Nominal values are the raw numbers — your salary, house price, or investment balance. Real values adjust for inflation and reflect actual purchasing power. A 5% pay rise with 4% inflation is only a 1% real increase. Always think in real terms for long-term financial planning.
Why Inflation Matters for Investors
Savings Accounts
When the savings rate is below inflation, you earn a negative real return. Your balance grows but buys less. A savings account paying 2% while inflation is 4% loses 2% of real value per year. Cash is safe nominally but risky in real terms.
Investments
Equities have historically returned 7-10% nominally, well above inflation. Inflation-linked bonds (gilts, TIPS) adjust automatically. Property also tends to keep pace. A diversified portfolio is the most reliable long-term inflation hedge.
How to Use This Inflation Calculator
Enter an Amount
Any sum you want to test against inflation.
Set Period & Rate
Choose start/end years and an inflation rate.
See the Impact
Equivalent value, purchasing power lost, and chart.
Strategies to Beat Inflation
- Invest in equities. Over long periods, stocks have returned 7-10% annually — well above inflation. A diversified global index fund is the simplest approach.
- Consider inflation-linked bonds. UK index-linked gilts and US TIPS adjust their principal with CPI, providing a guaranteed real return.
- Diversify globally. Different countries experience different inflation rates. International diversification protects against domestic inflation spikes.
- Review savings rates regularly. If your savings rate is below inflation, move to a better account or invest the surplus. Don't let cash sit earning nothing.
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