What this tool does
Model how a constant assumed inflation rate changes an equivalent future cost and the future purchasing power of money.
How to use it
- Enter an amount, annual inflation assumption and number of years.
- Calculate both the future equivalent cost and purchasing-power result.
- Compare several rates instead of reading the assumption as a CPI forecast.
Formula and method
Inflation factor = (1 + annual rate÷100)^years. Future equivalent cost = amount×factor. Future purchasing power of the original nominal amount = amount÷factor.
Worked example
At 3% for 10 years, 1,000 becomes an equivalent future cost of about 1,344. Keeping only 1,000 then would have purchasing power comparable to roughly 744 under this constant-rate scenario.
Common uses
- Long-term budget scenarios
- Explaining nominal versus real value
- Testing sensitivity to inflation assumptions
Limitations
The entered rate is a constant scenario, not live CPI data or a forecast. Actual inflation changes over time and differs by country, period and personal spending basket. Taxes, investment returns and currency changes are not included.
FAQ
Why are the two results different?
One asks how much future money may buy the same basket; the other asks what an unchanged nominal amount may buy later.
Does this use current official CPI?
No. It applies only the rate you enter. Official historical comparisons use ratios of published price indexes.