What this calculates
Enter an amount, an inflation rate and a number of years, and this tells you either what something costing that amount today will cost in future, or what a sum received in future is worth in today's money — plus how much buying power is lost and how long prices take to double.
The formula
Future cost
today's cost × (1 + rate)^yearsValue in today's money
future sum ÷ (1 + rate)^yearsBuying power lost
1 − 1 ÷ (1 + rate)^yearsYears to double
ln 2 ÷ ln(1 + rate), or roughly 72 ÷ rateThe rate is written as a decimal: 6% is 0.06. Inflation compounds, like interest — each year's rise is on top of the last.
Worked example
The other way round, ₹1,00,000 received in 10 years is worth ₹1,00,000 ÷ 1.7908 = ₹55,839.48 in today's money.
When to use it, and the mistakes to avoid
Use it to plan for a child's education, retirement or a big purchase, to judge whether an investment beats inflation, or to see what a salary or pension will really be worth later.
The mistakes that cost the most:
- Planning in today's prices. A goal that costs ₹10 lakh today will cost far more when you reach it.
- Adding instead of compounding. 6% for 10 years is 79% more, not 60%.
- Using too low a rate. Education and healthcare often rise faster than general inflation.
- Ignoring inflation on returns. A return below inflation loses buying power.
- Treating the result as certain. Inflation changes from year to year; try a few rates.
FAQ
How does inflation affect my money?
It makes the same things cost more each year, so the same money buys less. At 6% a year, something that costs ₹1,00,000 today costs about ₹1,79,085 in 10 years - and ₹1,00,000 then buys only what about ₹55,839 buys today.
How do I calculate the future cost with inflation?
Multiply today's cost by (1 + rate) raised to the number of years. ₹1,00,000 at 6% for 10 years is 1,00,000 × 1.06¹⁰ = 1,00,000 × 1.7908 = ₹1,79,084.77.
How long does it take prices to double?
Divide 72 by the inflation rate for a quick estimate - the 'rule of 72'. At 6%, prices double in about 12 years; the exact figure is 11.9. At 3%, it is about 23 to 24 years.
What inflation rate should I use?
The rate you expect for the things you will be paying for. Official consumer price inflation is an average; school fees, healthcare and rent often rise faster than it. The 6% default is only an example.
Why does this matter for savings and investments?
Because what counts is the return after inflation. A deposit paying 7% when prices rise 6% grows your buying power by only about 1% a year. Money that earns less than inflation is losing value even as the number goes up.
Is inflation the same as the cost of living?
Closely related. Inflation is the rate at which prices rise; the cost of living is what you actually spend. Your own inflation depends on what you buy.