Inflation is not an abstract percentage in the news; it is a slow leak in your wallet. The same money keeps its face value, yet a few years later it buys noticeably less. The calculator below turns that into a concrete figure. Put in your own numbers first, then read on to see what it says about keeping some of your savings in dollars.
Purchasing-power erosion calculator
Enter an amount, the annual inflation rate you expect, and how many years it sits. It returns the real purchasing power left and how much it lost. Everything is computed in your browser; nothing is uploaded or fetched online.
Enter an amount, an inflation rate and a number of years to see how purchasing power changes.
What purchasing power means
Purchasing power is simply “how much stuff a given amount of money can buy.” The number on your bank statement is the face value, and it does not shrink on its own; but prices drift up every year, so that face value buys a little less each time. The gap is the slice inflation quietly takes.
The math is short: an amount P, at an annual inflation rate i, after n years, keeps a real purchasing power of about P ÷ (1 + i)ⁿ. Six percent a year sounds mild, but it compounds, like interest, stacked year on year. At 6%, your money keeps only about half of today’s purchasing power in roughly 12 years. That is exactly the formula the calculator uses. No tricks, no pre-written numbers.
Why this matters for holding dollars
If the local currency where you live runs high inflation and drops in value from time to time, keeping all of your savings as local cash is like leaving it in a leaking bucket. Plenty of people first seriously consider “should I keep some dollars” once this sum wakes them up. The dollar’s own inflation is not zero either, but historically it tends to be lower and steadier, so as one part of your savings it can slow down how fast money shrinks while it sleeps.
This is not a claim that the dollar only goes up, nor a push to convert everything: exchange rates move, and converting and holding each carry cost and friction. It just makes one point plain: which currency and which container you keep savings in can matter more over time than you would guess. The real comparison is the actual purchasing power of each choice a few years out, not the face number in front of you today. For which containers dollars can go into, and the cost and risk of each, read the overview: where to hold dollars, and how to choose among four containers.
What to do with the result
The calculator gives you a sense of direction, not a prophecy: real inflation differs year to year, and nobody can nail the next decade of prices. Its use is to turn the abstract word “inflation” into a figure you can feel, then make a few calls from there:
- Separate “money to spend” from “money that sits.” Cash you need within a year or two is about safety and convenience, so do not agonize over inflation there; savings that sit untouched for three, five years or more are what inflation chews on most, and most worth deciding where to keep.
- Compare two currencies over the same span. Run your local inflation rate once, then run a lower rate (say the dollar’s long-run 2–3%). Line up the two “purchasing power after N years” figures and the gap is obvious.
- Don’t chase high yield to beat inflation. A shrinking figure is unnerving, but “guaranteed returns” and “principal-protected high interest” are usually traps. Beating inflation is slow work: put savings into a suitable container first, rather than rushing into something you don’t understand.