Inflation Calculator
Calculate the purchasing power of money over time. See how inflation erodes — or preserves — the real value of your dollars.
Understanding Inflation & Purchasing Power
Inflation is the rate at which the general level of prices for goods and services rises over time, eroding purchasing power. When inflation is 3%, a basket of goods costing $100 today will cost $103 a year from now — meaning your dollar buys less.
Our Inflation Calculator lets you see exactly how much a given amount of money in one year is worth in another. It uses compound interest mathematics — the same formula that governs investment growth, applied in reverse to show value erosion.
Purchasing Power Erosion
At the US historical average of 3% inflation, $1,000 in 2000 has the equivalent purchasing power of about $1,806 in 2024 — meaning prices roughly doubled over that period. What cost $1,000 in 2000 costs ~$1,806 today.
How the CPI Works
The Consumer Price Index (CPI) measures inflation by tracking the price of a fixed "basket" of goods: housing, food, transportation, healthcare. When the CPI rises, it means Americans are paying more for the same things.
Protecting Against Inflation
Historically, equities (stocks) have provided a ~7% real (inflation-adjusted) annual return. Real estate, commodities, and TIPS bonds also serve as inflation hedges for long-term investors.
The Fed's 2% Target
The US Federal Reserve targets 2% annual inflation as a healthy economic balance — low enough to preserve purchasing power, but high enough to encourage spending and investment rather than deflation (falling prices), which can be economically damaging.