BCBetter Calculators

Inflation Impact on Savings Calculator

See how inflation erodes the real value of your savings over time.

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Enter your values and click Calculate

How It Works

Real rate = (1 + savings rate) ÷ (1 + inflation rate) − 1. This is the Fisher equation, which correctly accounts for the compounding interaction between the savings rate and inflation — it is more accurate than the common approximation of simply subtracting inflation from the nominal rate. Nominal value = Savings × (1 + savings rate)^years shows the raw dollar total. Real value = Savings × (1 + real rate)^years shows what that dollar total is worth in today's purchasing power. A negative real rate means inflation is outpacing interest, so the real value will be lower than the starting balance. Purchasing power change = Real value − starting balance, which is positive for real growth and negative for real loss.

Examples

HYSA Beating Inflation
$20,000 at 4.5% APY with 3% inflation for 10 years.
Result: Nominal: ~$31,100. Real value: ~$22,800. Real gain: ~$2,800 in purchasing power.
Low-Rate Account Losing to Inflation
$20,000 at 0.5% APY with 4% inflation for 10 years.
Result: Nominal: ~$21,000. Real value: ~$13,500. Purchasing power loss: ~$6,500.
Break-Even Scenario
$50,000 where savings rate equals inflation at 3% for 20 years.
Result: Real value = $50,000 exactly — no real gain, no real loss.

Frequently Asked Questions

What is the real interest rate?
The real interest rate is the savings rate adjusted for inflation — it shows the true growth of your purchasing power rather than just the nominal dollar increase. It is calculated precisely using the Fisher equation: real rate = (1 + nominal) ÷ (1 + inflation) − 1.
How do I protect savings from inflation?
High-yield savings accounts (HYSAs), Treasury I-bonds (which adjust their yield with CPI), and TIPS (Treasury Inflation-Protected Securities) are designed to keep pace with or beat inflation. Long-term investments in broad index funds have historically provided real returns above inflation over 10-year periods.
What inflation rate should I use for planning?
The US long-run average (1913–present) is approximately 3% per year. The Federal Reserve's target is 2%. For conservative retirement planning, 3–4% is widely used. Check the current CPI release from the Bureau of Labor Statistics for a recent figure.

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