How inflation erodes money
Inflation does not take money out of your account — it quietly reduces what that money can buy. The maths is the same compounding that grows investments, running in reverse against cash.
The two questions
There are two ways to look at it, and this tool shows both:
future cost of today's price = amount × (1 + inflation)^years purchasing power of today's amount = amount ÷ (1 + inflation)^yearsAt 3% inflation, 1,000 today will cost about 1,344 in ten years — or, put the other way, 1,000 held as cash for ten years will buy only about 744 of today's goods.
The rule of 70
To estimate how long it takes for money to lose half its value, divide 70 by the inflation rate. At 3%, purchasing power halves in about 23 years; at 7%, in just ten. In a high-inflation economy, cash can lose half its worth within a decade.
Why this matters for savings
It explains why cash in a low-interest account loses value even as the balance holds steady. If an account pays 1% while inflation runs at 3%, you lose about 2% of purchasing power a year — the number on the statement stays the same while what it buys shrinks. Beating inflation, not just growing the nominal balance, is the real goal.
Built by Mohammed Jamil. Corrections to [email protected].