Inflation Calculator
See what your money will be worth in 5, 10 or 20 years at different inflation rates.
What will your money be worth in 20 years?
Inflation is the gradual increase in prices over time, which means the same amount of money buys less in the future than it does today. At a seemingly modest 2% annual inflation rate, 1,000 euros today would only have the purchasing power of about 672 euros in 20 years. At 3% inflation, that drops to just 554 euros. Understanding inflation is essential for anyone making long-term financial plans, from retirement savings to major purchases.
Central banks in most developed economies target an inflation rate of around 2% per year. This target exists because a moderate level of inflation encourages spending and investment over hoarding cash. However, actual inflation can deviate significantly from the target. In 2022, eurozone inflation spiked to over 8% due to energy prices and supply chain disruptions, a stark reminder that inflation can be unpredictable.
The impact of inflation on savings is particularly concerning for those holding large amounts in cash or low-interest savings accounts. If your savings earn 1.5% interest while inflation runs at 2.5%, your money is actually losing purchasing power at a rate of 1% per year. Over a decade, this silent erosion can reduce the real value of your savings by roughly 10%. This is why financial advisors recommend investing in assets that outpace inflation for long-term goals.
Inflation interacts with mortgages in an interesting way. While inflation reduces the real value of your savings, it also reduces the real value of your debt. A fixed-rate mortgage becomes cheaper in real terms over time because you repay it with money that is worth less than when you borrowed it. This is one reason why property is often considered a good inflation hedge: the asset tends to appreciate with inflation while the debt shrinks in real terms.
To protect your purchasing power, consider a diversified investment strategy. Stocks, real estate, and inflation-linked bonds have historically outpaced inflation over long periods. The key is to ensure that your investment returns exceed inflation after tax, giving you a positive real return that actually grows your wealth over time.