Two sides of the same coin
Inflation can be read as rising prices (amount × (1+r)ʸ) or shrinking purchasing power (amount ÷ (1+r)ʸ). At 3% inflation, $10,000 of goods costs about $13,439 in ten years — equivalently, your $10,000 will only buy about $7,441 of today's goods.
Choosing a rate
Central banks in most developed economies target around 2–3% annually, but realized inflation varies by decade and by what you buy. Try a couple of rates to see the range rather than trusting a single projection.
Frequently asked questions
What inflation rate should I use?
2–3% reflects typical central-bank targets for long-run planning; use higher rates to stress-test savings against periods like the early 2020s.
Why does inflation matter for savings?
Cash that earns less than inflation loses purchasing power every year even though the balance looks unchanged.
Is this based on official CPI data?
No — it is a projection tool. You choose the rate; official CPI describes the past, not the future.