📖 The story
The Berger family sets aside $60,000 and wants to know what today's purchasing power this amount will still have in 25 years if inflation is 3 %.
ℹ Discounting with the inflation rate.
Topics › Inflation & Purchasing Power › Purchasing power of a saved amount in the future
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Inflation & Purchasing Power
Purchasing power of a saved amount in the future
Change any number and press "Calculate" – or use "Type in" on the right to watch it entered step by step.
What you learn
Anyone who just hoards money loses value in real terms – inflation quietly eats away at purchasing power. Money has to work just to hold its value.
In short: Anyone who just hoards money loses value in real terms – inflation quietly eats away at purchasing power.
Formula
Today's purchasing power = amount / (1 + inflation)^n
With the example numbers
60,000.00 $ / (1 + 0.0300)25 = 28,656.33 $
How to read the formula
Here it is discounted: purchasing power = amount/(1+inflation)ⁿ. You convert a future amount back into today's purchasing power and see how much real substance inflation devours over the years.
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