Inflation Impact Calculator
See how inflation erodes purchasing power over time. Understand why your money buys less each year.
Historical US average: ~3%
Understanding Inflation
What is inflation? Inflation is the rate at which prices rise over time, reducing the purchasing power of money. When inflation is 3%, something that costs $100 today will cost $103 next year.
Why it matters: If your savings or income don't grow faster than inflation, you're actually losing money in real terms. This is why investing is important for long-term financial health.
Beating inflation: To maintain purchasing power, your investments need to earn returns higher than inflation. Historically, stocks have outpaced inflation (~7% real return), while savings accounts often don't.
The "Rule of 72": Divide 72 by the inflation rate to estimate how many years until prices double. At 3% inflation, prices double roughly every 24 years.
This calculator provides estimates for educational purposes only.