1. What is Future Buying Power?

Future buying power refers to the amount of goods or services that a specific amount of money today can purchase in the future, accounting for inflation. It shows how inflation erodes the purchasing power of money over time.

2. How Does the Calculator Work?

The calculator uses the future value formula:

Where:

• \( \text{Present} \) — Current amount of money (USD)
• \( \text{Inflation} \) — Annual inflation rate (as decimal)
• \( t \) — Time period in years

Explanation: The formula calculates how much you would need in the future to have the same purchasing power as your current amount.

3. Importance of Inflation Calculation

Details: Understanding future buying power helps with financial planning, retirement savings, and making informed decisions about investments and long-term purchases.

4. Using the Calculator

Tips: Enter current amount in USD, expected annual inflation rate in percentage, and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a typical inflation rate?
A: Historically in the US, average inflation is about 2-3% annually, but it can vary significantly by country and economic conditions.

Q2: How does this differ from investment returns?
A: This shows purchasing power erosion. To calculate real growth, you'd need to subtract inflation from investment returns.

Q3: Why is future buying power important?
A: It helps you understand how much you need to save to maintain your standard of living in the future.

Q4: Does this account for changing inflation rates?
A: No, this assumes a constant inflation rate. Actual inflation varies year to year.

Q5: How can I protect against inflation?
A: Investments like stocks, real estate, or inflation-protected securities (TIPS) can help maintain purchasing power.