See how inflation changes the value of money over time: what today's money will be worth in the future, and how much more things will cost.
What inflation does to your money
Inflation is the general rise in prices over time. When prices rise, each dollar buys a little less. Money kept in cash or a low-interest account slowly loses buying power, even though the number in the account stays the same.
Future cost = Today's cost × (1 + inflation)years
Future buying power = Amount ÷ (1 + inflation)years
Worked example
At 3% inflation for 10 years:
- Things that cost $10,000 today would cost about $13,439.
- $10,000 kept in cash would buy only what about $7,441 buys today, a 25.6% loss of buying power.
How to protect your money from inflation
- Earn a return above inflation on long-term savings, for example through diversified investments.
- Use high-yield savings for short-term money rather than accounts paying almost nothing.
- Consider inflation-protected options such as U.S. Treasury I bonds or TIPS, which adjust with inflation.
- Plan with real numbers. Retirement and college projections should account for inflation.
Frequently asked questions
What inflation rate should I use?
The U.S. Federal Reserve targets 2% a year over the long run, but actual inflation varies. Many planners use 2.5% to 3% for long-term estimates.
What is the "real" return?
Your return after inflation. Roughly, real return ≈ nominal return − inflation. A 5% return with 3% inflation is about a 2% real gain.
Related tools
Results are estimates for planning and education only. They are not financial, tax, legal or medical advice. Check important numbers with a qualified professional.