Understand How Inflation Reduces the Value of Money Over Time
1. Purpose
An inflation calculator helps you understand how the purchasing power of money changes over time due to inflation.
It answers an important question:
“How much will today’s money be worth in the future?”
This tool is designed for:
- Long-term financial planning
- Goal setting (retirement, education, big expenses)
- Understanding real returns vs nominal returns
2. What is Inflation (In Simple Terms)
Inflation refers to the general increase in prices over time, which leads to a decline in purchasing power.
In simple words:
- What ₹100 buys today will buy less in the future
- Even moderate inflation compounds over long periods
👉 Inflation is one of the biggest silent risks to long-term wealth.
3. Why Inflation Matters for Investors
Inflation impacts:
- Savings held in cash
- Fixed-income returns
- Long-term financial goals
Ignoring inflation can result in:
- Underestimating future expenses
- Overestimating real investment returns
- Falling short of financial goals
4. How the Inflation Calculator Works
The calculator estimates the future value of today’s money after accounting for inflation.
It uses the compound inflation formula:
Future Value = Present Value × (1 + inflation rate)ⁿ
Assumptions:
- Inflation rate remains constant
- Compounding is annual
- Taxes and lifestyle changes are not considered
5. Inflation Calculator – Inputs
Current Amount (₹)
Value of money today
Expected Inflation Rate (%)
Average annual inflation assumption
Time Period (Years)
Number of years in the future
👉 Tip: Use conservative inflation assumptions (5–6% for long-term planning in India)
6. Calculator Output
Future Value (₹)
Amount required in the future to maintain the same purchasing power
7. How to Interpret the Results
- A higher inflation rate significantly increases future costs
- Longer time periods magnify inflation impact
- Small differences in inflation assumptions can change outcomes meaningfully
👉 Inflation impact grows silently but powerfully over time
8. Common Mistakes to Avoid
- Ignoring inflation in goal planning
- Assuming inflation will remain low forever
- Using nominal returns instead of real returns
- Planning future expenses using today’s costs
9. Inflation vs Investment Returns
Nominal Return
- Reported investment return
- Does not account for inflation
Real Return
- Nominal return minus inflation
- Reflects actual purchasing power growth
👉 Wealth grows only when real returns are positive
10. Who Should Use This Calculator
Suitable for:
- Long-term planners
- Retirement and education goal planning
- Anyone estimating future expenses
Not suitable for:
- Short-term spending decisions
- Trading or market timing
- Product selection
11. Practical Example
If an expense costs ₹5,00,000 today and inflation averages 6%:
- In 15 years, the same expense may cost approximately ₹11,97,000
👉 This highlights why inflation-adjusted planning is critical
12. Disclaimer
This inflation calculator provides illustrative estimates only.
Actual inflation may vary over time.
Samnidhi Insights does not provide investment advice or guarantees.
13. Inflation Formula (For Reference)
Future Value = PV × (1 + i/100)ⁿ
Where:
- PV = Present value
- i = Inflation rate
- n = Time period in years