Inflation Calculator
See how inflation affects your money over time. Calculate future cost and real purchasing power of today's money.
What Inflation Really Does to Your Money
Inflation is the silent tax on your savings. It doesn't take money from your account — it makes each pound buy less than it did last year. At 3% inflation, £1,000 in your savings account has the buying power of just £744 after 10 years. The number on your statement looks the same, but it buys 25% less stuff.
Think of it like a leak in a boat. A slow leak doesn't sink you today — but ignore it for a decade and you're in trouble. Cash sitting in a current account earning 0% loses real value every single day. That's why investing matters, even when markets feel scary.
The formula is simple: Future Cost = Today's Cost x (1 + inflation rate) ^ years. It works both ways — you can project what things will cost in the future, or calculate what today's money will feel like in the future.
UK Inflation: A Historical Perspective
| Period | Average CPI | £1,000 in 2000 = | Context |
|---|---|---|---|
| 2000-2010 | 2.1% | £1,230 | Stable period, BoE target met |
| 2010-2020 | 2.4% | £1,550 | Post-financial crisis recovery |
| 2020-2023 | 5.8% | £1,840 | COVID + energy crisis spike |
| 2023-2026 | 3.2% | £2,020 | Returning toward target |
What this means for you: Something that cost £1,000 in 2000 costs about £2,020 today — it's more than doubled. The Bank of England targets 2% per year, but actual inflation often runs higher. Planning around 3% gives you a realistic buffer.
How Inflation Affects Different Parts of Life
| Category | 10-Year Price Change (UK) | Example |
|---|---|---|
| Housing / rent | +40-60% | Average UK rent: £750 (2015) → £1,200 (2025) |
| Energy bills | +80-120% | Average dual fuel: £1,100 (2020) → £2,000+ (2024 peak) |
| Groceries | +30-40% | Weekly shop: £60 (2015) → £85 (2025) |
| University tuition | +0% | Capped at £9,250 since 2017 (but living costs rose) |
| Technology | -20-40% | Computing power gets cheaper (deflation in tech) |
| Childcare | +40-50% | Full-time nursery: £13,000 (2015) → £19,000 (2025) |
What this means for you: Overall CPI averages mask huge variation. Housing and energy have inflated far faster than the headline rate. Your personal inflation rate depends on what you actually spend money on. If you rent and have kids, you've felt inflation much harder than headline numbers suggest.
Beating Inflation: Where to Put Your Money
Cash ISAs (short-term)
Currently paying 4-5% — above inflation for now. Good for emergency funds and money you'll need within 1-3 years. But rates drop when the BoE cuts, so don't rely on them long-term.
Stocks and shares ISA (long-term)
Global equity index funds have returned 7-10% per year over decades — well above inflation. Volatile short-term, but over 10+ years, the best proven way to grow wealth in real terms.
Workplace pension
Tax relief plus employer match means your money grows 40-100% before any investment returns. The most tax-efficient way to beat inflation for retirement savings.
Index-linked savings bonds
NS&I and some providers offer bonds that track inflation (RPI or CPI). Returns are modest but guaranteed to keep pace with rising prices — zero real loss.
The Rule of 72
Want a quick way to estimate how long it takes for prices to double? Divide 72 by the inflation rate. At 3% inflation, prices double in 72 ÷ 3 = 24 years. At 6%, they double in just 12 years. At 10%, they double in about 7 years.
The same trick works for investments. Money growing at 7% per year doubles in about 10 years. At 4% (a cash ISA), it takes 18 years. This is why the gap between inflation-matching savings and growth investments gets enormous over decades.
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Common uses
- Projecting future costs of goods and services
- Understanding how savings lose value over time
- Planning retirement income against rising prices
- Comparing historical and future purchasing power
- Evaluating whether investments beat inflation
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