Inflation Calculator
Inflation is compound interest working against you. This calculator shows what a sum will be worth after years of rising prices, and what you would need to keep pace.
Formula
Future cost = amount × (1 + i)ⁿ · Today’s value = amount ÷ (1 + i)ⁿ
- i = annual inflation as a decimal
- n = number of years
- Rule of 72: prices double in about 72 ÷ rate years
£10,000 after 10 years at 3% buys what £7,441 buys now
How Prices Compound
Inflation compounds exactly as interest does:
Future price = Current price × (1 + rate)years
At 3% a year, something costing £1,000 today costs about £1,806 in twenty years.
Turned around: £1,000 kept under the mattress for twenty years would buy roughly £554 worth of today's goods. Cash does not hold its value; it quietly loses it.
Real Return Is What Counts
A savings account paying 4% while inflation runs at 3% is gaining about 1% in real terms. If the rate falls below inflation, the balance grows while your purchasing power shrinks.
Real return ≈ nominal rate − inflation rate
This is the single most useful check on any savings or investment return.
CPI, RPI and Your Own Rate
The UK publishes several measures. CPI is the headline figure used for the inflation target and most benefit uprating; RPI is an older measure that typically runs higher and still appears in some rail fares and index-linked bonds.
Neither matches your personal experience. If a large share of your spending goes on energy or rent, your effective inflation rate can be well above the published number.
Quick Reference
| Years | At 2% | At 3% | At 5% |
|---|---|---|---|
| 5 | £9,057 | £8,626 | £7,835 |
| 10 | £8,203 | £7,441 | £6,139 |
| 20 | £6,730 | £5,537 | £3,769 |
| 30 | £5,521 | £4,120 | £2,314 |
Frequently Asked Questions
- What will £1,000 be worth in 20 years?
- At 3 per cent inflation, roughly £554 in today's purchasing power. The cash amount is unchanged; what it buys is not.
- What is the difference between CPI and RPI?
- CPI is the headline measure used for the Bank of England target and most uprating. RPI is an older calculation that usually reads higher and persists in some contracts and rail fares.
- How do I beat inflation?
- You need a return above the inflation rate. Cash savings often fail this test over long periods, which is the usual argument for investing money you will not need soon.
- Why does my personal inflation feel higher?
- Published indices track a representative basket. If your spending is weighted towards categories rising faster than average, such as energy or rent, your own rate is higher.