Inflation Calculator
See how your money's value changes over time, and and how much it could be worth in the future.
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What is inflation?
Inflation measures the average change in prices for goods and services over time. In other words, inflation represents an average increase in prices. Deflation is the opposite — it represents an average decrease in prices.
Inflation matters because it affects the cost of things consumers buy. A steady, predictable inflation rate is ideal. When inflation is too high, goods and services cost more and consumers spend less. The inflation rate for the last year (ending in May 2024) is 3.3%.
Investing for long-term goals can help your money outpace inflation. To get started, view NerdWallet's analysis of the best investment accounts or our list of the best financial advisors.
Average inflation rate
The long-term average inflation rate is around 3%, and the Federal Reserve target inflation rate is 2%. According to the Federal Reserve, a 2% inflation rate aligns most with the system's mandate to maintain maximum employment and price stability. When inflation is stable, households can accurately predict their costs, whether that means the price of consumer goods or borrowing money.
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How to calculate the inflation rate
To calculate the inflation rate, you’ll need a start date, an end date, and a chart of the Consumer Price Index, a measure of average changes in prices over time issued by the U.S. Bureau of Labor Statistics.
Subtract the CPI of the start date from the CPI of the end date.
Divide that number by the CPI of the start date.
Multiply this number by 100 and add a percent sign, and there’s the inflation rate for that period.
Example:
1990 CPI = 130.7
2010 CPI = 218.056
Equation: ((218.056-130.7)/130.7) x 100
So, we have 66.837% inflation between 1990 and 2010.
To see how inflation affects the value of $1, first divide the inflation rate by 100. Then, multiply that number by $1 (or any starting dollar amount you wish). Then, add that number to your dollar amount.
Equation:
((66.837/100) x 1) + $1 = $1.67
((66.837/100) x 5) + $5 = $8.34
In this instance, $1 in 1990 had a purchasing power of $1.67 in 2010, and $5 in 1990 had a purchasing power of $8.34 in 2010.
Inflation example
Say a movie ticket costs $5 in 2000, and in 2024, that ticket costs $10. This doesn't mean $5 would grow to $10. It means your $5 — if you stuck it under a mattress for 24 years — would only buy you half of a ticket in 2024.
If the amount of money you have or make stays the same, it will buy you less as time goes on. That’s due to inflation.
If you want the money you save to keep pace with inflation — or better yet, outgrow it — you need it to gather more than dust while you pass the time.
Investing allows you to accumulate more money with the dollars you save. For context, the stock market has historically posted an average annual return of around 10%, or about 7% after inflation.
If your investments earn a 6% average annual return, a fairly conservative goal, $5 invested in 2000 could be worth nearly $20 today. Invest a larger amount — say, $10,000 — and it will start to snowball: $10,000 invested in 2000 could be worth around $38,000 today.
Keep in mind that investing in the stock market is for long-term goals that are at least five years away. If you need your money before that, consider the best short-term investments.
Next steps
See how your money can grow with our investment calculator.
Learn about bonds linked to inflation in our I bonds guide.
Find ideas on how to protect against inflation.
Ready to get started? Check out our picks for the best brokers.
