Inflation Calculator

Understand the Changing Value of Money

Inflation erodes the purchasing power of money over time. This calculator helps you understand this concept by showing what a certain amount of money would be worth in different years, based on historical inflation data. It helps you see how the 'real' value of money changes.

The Inflation Formula Explained

To calculate the future value of money, we use a formula similar to compound interest: Future Value = Present Value × (1 + Inflation Rate)ⁿ Where:

• Present Value is the starting amount of money.
• Inflation Rate is the annual rate of inflation.
• n is the number of years. This calculator uses historical Consumer Price Index (CPI) data for its calculations to provide an accurate reflection of past inflation.

How to Use the Calculator

1. Initial Amount: Enter the amount of money you want to convert.
2. Start Year: Enter the year the money is from.
3. End Year: Enter the year you want to convert the money's value to.
4. Calculate: The tool will show the equivalent value in the end year's dollars and the total inflation rate over the period.

Real-World Example

You want to know what $100 in 1990 would be equivalent to in 2023 purchasing power.

• Initial Amount: $100
• Start Year: 1990
• End Year: 2023
• Based on historical CPI data, the calculator would show that $100 in 1990 has the same buying power as approximately $235 in 2023. The total inflation over that period was about 135%.

Frequently Asked Questions (FAQ)

• What data is this calculator based on? This calculator uses the Consumer Price Index (CPI-U) data provided by the U.S. Bureau of Labor Statistics, which is a standard measure of inflation.
• Can I use this to predict future inflation? No, this tool is based on historical data. Predicting future inflation is complex and depends on many economic factors. You can, however, use it to see how different hypothetical future inflation rates would affect your money.
• Why is understanding inflation important? It's crucial for financial planning. To grow your wealth, your investment returns must be higher than the rate of inflation. Otherwise, your money is losing purchasing power even if its nominal value is increasing.