Inflation Calculator

The Silent Killer of Wealth

If you bury a suitcase with $100,000 in your backyard and dig it up 20 years later, you will still have $100,000 in cash. However, you will likely be able to buy only half as much stuff with it.

This is Inflation. It is the rate at which the general level of prices for goods and services rises, eroding your purchasing power. Economists often refer to it as the "Hidden Tax" because it steals your wealth without the government ever sending you a bill.

The "Rule of 72" Applied to Inflation

The famous Rule of 72 helps investors calculate when their money doubles. But for inflation, it tells you when your money is cut in half.

Formula: 72 ÷ Inflation Rate = Years to halve value.

• At 3% Inflation: Your money loses half its value in 24 years.
• At 6% Inflation: Your money loses half its value in just 12 years.
• At 9% Inflation: Your money loses half its value in 8 years.

What is "Purchasing Power"?

Purchasing power isn't about the number of digits in your bank account; it's about what you can exchange that money for.

In 1970, a cup of coffee cost $0.25. Today, it costs $3.00. The coffee hasn't become 12x better; the currency has become 12x weaker. Our calculator shows you the "Purchasing Power" metric to illustrate how much "Real Value" your savings will hold in the future.

Historical Inflation: A Rollercoaster

Inflation is rarely a straight line. It spikes during wars and pandemics and drops during recessions.

How to "Beat" Inflation

Since holding cash guarantees a loss in purchasing power, the only defense is Assets. Historically, certain assets rise in price along with inflation.

• Stocks: Companies raise prices to match inflation, increasing their stock value.
• Real Estate: Rents and home values typically rise with the Consumer Price Index (CPI).
• Gold/Commodities: Often used as a hedge when currency weakens.

If your salary isn't increasing by at least 3-4% every year, you are effectively taking a pay cut.