Inflation Calculator

Understanding Inflation

Inflation is the gradual increase in the price of goods and services, which reduces the purchasing power of money over time. This calculator helps you estimate how much a product, service, or expense may cost in the future when a fixed inflation rate is applied.

How It Works

The calculation applies the annual inflation rate to the current cost over a specified number of years. The longer the time horizon, the greater the compounding effect of inflation, which means prices rise more significantly over extended periods.

Formula

Future Value = Present Value × (1 + i)^n Where: i = Annual Inflation Rate n = Number of Years

This formula shows how today’s money will lose value in the future as inflation compounds year after year.

Key Insights

• Purchasing Power Declines: Over time, the same amount of money buys fewer goods and services.
• Higher Inflation, Faster Impact: As inflation rates rise, the cost of living increases at a quicker pace.
• Time Magnifies Effect: Even modest inflation has a significant impact when applied over many years.

Example

Suppose an item costs ₹1,00,000 today. With an average inflation rate of 6% per year, in 10 years the same item could cost approximately ₹1,79,000. This illustrates how inflation steadily increases future expenses.

Tips

• Plan Ahead: Always account for inflation when setting long-term financial goals.
• Invest Wisely: Choose assets such as equities, real estate, or inflation-indexed bonds that have the potential to outpace inflation.
• Review Regularly: Revisit your financial strategy periodically to ensure it stays aligned with rising costs and market trends.

By understanding the impact of inflation, you can make better investment choices, safeguard your wealth, and maintain financial security in the future.