Finance · 5 min read
How to Calculate Inflation Impact
What a fixed cash amount buys after prices rise
Inflation scales prices by (1 + i)^t and erodes the purchasing power of cash left uninvested. This tutorial walks through the inflation factor, a $100 / 3% / 10-year worked example, and a playground that shows what $100 buys as years and the rate change. Figures are illustrative; fees and taxes are omitted.
Written by the My Calculator Stack editorial team. About our methods
These figures are illustrative. A constant inflation rate is an assumption, not a forecast. Fees, taxes, and product-specific rules are omitted. This is not investment, tax, or financial advice.
1.What inflation does to cash
A constant annual inflation rate i raises the price level by the factor (1 + i)^t over t years. A fixed nominal amount that does not grow with prices buys less. The inverse factor 1/(1 + i)^t converts a future nominal dollar into today’s purchasing power. Real wages, COLA clauses, and asset returns sit outside this identity.
2.The formula
Future equivalent is FV = PV(1 + i)^t — the nominal dollars needed later to match today’s purchasing power. Purchasing power of a held cash amount is PP = PV / (1 + i)^t. PV is today’s amount, i is the annual inflation rate as a decimal (3% → 0.03), and t is years. The same pair of results powers the inflation calculator on this site.
\[ PP = \frac{PV}{(1 + i)^{t}} \]
3.Worked example
Take $100 at 3% inflation for 10 years — the same defaults as the inflation calculator. The factor is (1.03)^10 ≈ 1.3439. Future equivalent ≈ $134.39 (what you would need in 10 years to buy what $100 buys today). Purchasing power of $100 held as cash ≈ $74.41 in today’s dollars. The bar shrinks as i or t rises.
\[ PP=100/(1.03)^{10}\approx 74.41 \]
4.Purchasing-power bar
Move the inflation rate and years (and the cash amount if you want) to see what that cash buys in today’s dollars. The bar compares today’s amount with eroded purchasing power. This is a teaching widget — no CPI series, no fees, no full calculator chrome. Open the inflation calculator when you want the standalone tool.
Inline playground
Illustrative — constant rate, not a forecast
Purchasing power in today’s dollars
$74.41
Future equivalent $134.39
100 / (1.03)^10 ≈ 74.41
Illustrative only — a constant inflation rate, no CPI history, no fees or taxes.
Open the full inflation calculator →5.Open the full calculator
The inflation calculator uses the same factor, the same $100 / 3% / 10-year example, and reports both future equivalent and purchasing power. Browse other finance tools if you need future value of an investment or APY next.
Try it yourself
Open the related calculator and put these formulas to work.