Inflation quietly shrinks what a euro buys. Enter an amount, an inflation rate and a number of years to see today's money in future purchasing power.
At 3% inflation, €1,000 buys only about €740 worth of goods after ten years. This is why long-term plans should think in real (inflation-adjusted) terms.
Pair it with the Real Return After Tax calculator to see whether your investments actually outpace inflation once taxes are removed.
Working backwards is often the more revealing direction. A salary of €40,000 twenty years ago at 2.5% average inflation is worth around €65,000 today — which is the honest comparison to make before concluding that pay has risen, and the reason long-run charts of wages or house prices mislead when left in nominal terms.
The rate compounds, so small differences in the assumption diverge sharply over long horizons. Over thirty years, 2% inflation halves purchasing power while 3% cuts it by nearly 60%; the gap between those two assumptions is larger than most people expect from a single percentage point.
Not everything in a budget inflates together. Housing, energy and services have run persistently above the headline rate in many countries while electronics have fallen, so a retirement plan weighted toward services should assume more than the index rather than exactly it.
Frequently asked questions
How does inflation affect savings?
It silently reduces what each euro buys: at 3% inflation, money loses about a quarter of its purchasing power in ten years. Cash that earns less than inflation is shrinking in real terms.
What inflation rate should I assume?
The ECB targets 2% over the medium term, and long-run averages in developed economies sit near 2–3%. Test a higher figure to see how sensitive your plan is.
What is the difference between nominal and real value?
Nominal is the number on the account; real is what it buys. Long-term plans should think in real terms — a pension in 30 years must be judged at future prices, not today's.