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Inflation Calculator

Calculate how inflation erodes the purchasing power of your money over time. Find out what your money will be worth in the future.

€
years
%

Purchasing power in 20 years

€672.97

Purchasing power loss

32.702999999999996%

You need for the same purchasing power

€1,485.95

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What is inflation and why does it matter?

Inflation refers to the general increase in the price level of goods and services in an economy. When prices rise, you can buy less with the same amount of money than before. The European Central Bank (ECB) aims for an inflation rate of approximately 2 percent per year, as moderate inflation is considered a sign of a healthy economy. For savers, however, inflation means that money sitting in a bank account gradually loses its real value when interest rates are lower than the inflation rate.

How is purchasing power loss calculated?

The loss of purchasing power due to inflation can be calculated with a simple formula: the current amount is divided by (1 + inflation rate) raised to the power of the number of years. For example, with an amount of $10,000 and an annual inflation rate of 2 percent, the real purchasing power after 20 years is only about $6,730. This means that your $10,000 will only buy as much in 20 years as $6,730 does today. Conversely, you would need approximately $14,860 after 20 years to have the same purchasing power as $10,000 today.

Historical inflation rates

Inflation rates in developed economies have been mostly moderate over the past decades. In the 1970s, inflation in many countries exceeded 6 percent, while in the 2010s it often fell below 1 percent. The years 2021 to 2023 brought a significant spike in inflation, reaching up to 8.7 percent in some European countries, driven by supply chain disruptions and rising energy prices. Since then, inflation has gradually normalized and is moving back toward the central bank target of 2 percent.

Strategies to beat inflation

To protect your wealth from the gradual erosion caused by inflation, you should invest in asset classes whose returns have historically exceeded the inflation rate. Broadly diversified stock index funds (ETFs) have historically delivered average annual returns of 7 to 9 percent, significantly outpacing inflation. Real estate and inflation-linked bonds also offer some degree of inflation protection. Cash and low-interest savings accounts, on the other hand, are particularly vulnerable to purchasing power losses. This inflation calculator helps you understand the impact of inflation on your wealth and plan accordingly.

Frequently Asked Questions

Inflation is the general increase in the price level of goods and services over time. It means that the same amount of money buys less than it did before. Central banks like the ECB and the Federal Reserve typically target an annual inflation rate of around 2 percent.
Inflation erodes the purchasing power of your money. If your savings earn less interest than the rate of inflation, you are effectively losing money in real terms. At 2 percent annual inflation, your money will be worth only about 67 percent of its current value after 20 years.
Nominal returns are the raw percentage gains on an investment without adjusting for inflation. Real returns subtract the inflation rate from nominal returns and show whether your wealth is actually growing in terms of purchasing power. Only real returns tell you if you are truly getting richer.
The European Central Bank targets 2 percent inflation. Historically, average inflation in developed economies has been around 2 to 3 percent per year. For conservative long-term planning, using 2 to 3 percent is a reasonable assumption.
To protect your wealth from inflation, invest in asset classes that have historically outpaced inflation, such as broadly diversified stock index funds (ETFs), real estate, and inflation-linked bonds. Cash and low-interest savings accounts tend to lose purchasing power during periods of higher inflation.

All calculations are for general informational purposes only. Not financial, tax, or legal advice. No guarantee of accuracy. Use at your own risk. Full disclaimer