What is an Inflation Calculator?
An inflation calculator is a helpful tool for understanding how inflation affects the purchasing power of money over time. Based on average inflation rates, it helps you estimate how much a certain amount of money today will be worth in the future.This is especially useful for long-term financial planning, whether you are planning and saving for retirement, your child's education, or future expenses. By understanding the effects of inflation, you can plan better, invest smarter, and protect your family's financial future.
Why Use One?
The Inflation Calculator helps you easily track how purchasing power changes over time by considering inflation rates. Simply enter the amount and years to see how inflation impacts money's value, enabling you to make informed financial decisions. Use this inflation calculator to better understand economic shifts and plan your budget more effectively.
How to use the Inflation Calculator?
Using the inflation calculator and understanding how inflation can affect your overall savings is very easy. To use the calculator, follow the steps below:
- Step 1: Use the slider to enter the value of your current expenses.
- Step 2: Use the slider to enter the inflation rate percentage. It should be the current rate.
- Step 3: Use the slider to enter the period in years for which you want to understand the future price.
- Step 4: The calculator will display the exact amount based on the information you entered. A pie chart will also show the future cost and total inflation.
You can even use it as an inflation calculator by year to understand how the prices will change
How is Inflation Calculated?
Inflation is calculated by using Consumer Price Index. It measures the change in the price of goods and services by taking a weighted average value of each.
CPI = (Cost of Fixed Basket of Goods and Services in Current Year/ Cost of Fixed Basket of Goods and Services in Base Year) *100
Note that inflation can be calculated using the formula once the CPI for the two years is calculated.
Formula for Inflation
Inflation can be measured by using Consumer Price Index (CPI)
Inflation = ((CPI x+1 – CPIx)/ CPIx))*100
Note: CPIx is the Initial Consumer Price of the Index
Benefits of Inflation Calculator
Future Value Estimation They estimate the future cost of current expenses, such as showing how ₹1 lakh today might become ₹1.8 lakh in 10 years at 6% inflation. This aids precise financial planning for goals like retirement or education.
Purchasing Power Insight Users gain understanding of inflation's impact on lifestyle maintenance, helping adjust savings to preserve real wealth despite price hikes. It highlights the need for returns exceeding inflation rates.
Investment and Budget Planning The tools assist in evaluating if investments outpace inflation, enabling smarter portfolio adjustments and budget tweaks. They support decisions on insurance coverage or loans by factoring in future needs.
Time-Saving and Accessibility Manual calculations are tedious; these free online calculators deliver instant results using historical CPI data, making complex math accessible without expertise. They promote proactive strategies like increasing savings rates.