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  3. Inflation Calculator

inflation calculator

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How to use the Credit Karma inflation calculator

Our inflation calculator can help you estimate how the buying power of your money has changed over time. Using the calculator, you can compare the value of a dollar in 1945 to its value today, for example.

Keep in mind that this calculator only provides an estimate based on the information you enter to compare one year to another. And while it doesn’t calculate future inflation rates, it can tell you the cumulative inflation rate between the years you enter.

Here’s what you’ll need.

Amount of money

The is the amount of money from the initial year. For example, if you want to know how much $1 in 1950 would be worth now, you’d put $1 in this field.

Initial year

This is the year in the past that acts as a starting point for your calculation.

Final year

This is the year for which you want to determine what the initial amount is worth.

What is inflation?

Inflation is an economic measurement of the rate at which the prices for goods and services change over time. Generally the increase in the cost is gradual and occurs either because:

  • Consumer demand exceeds the supply, or
  • There’s a decrease in the supply of a good(s) that’s widely used in other goods and services.

How inflation is calculated

Inflation is measured and tracked by the federal government using the consumer price index. The index considers the average costs consumers are paying for various goods and services across day-to-day categories like food, energy, medical services, vehicles and clothes.

What is the cumulative inflation rate?

While the consumer price index can help you understand the change in the cost of goods and services over a 12-month period, if you want to determine how the value of a dollar has changed over longer periods of time, you’ll need to look at what’s called the cumulative inflation rate.

Our inflation calculator can help you easily figure this out.

For example, let’s say you want to know the value of $1,000 in 1950 compared to 2021. Using our calculator, you can see that the same $1,000 would be worth about $11,243 today. That’s a cumulative inflation rate of more than 1,024%.

The impact of inflation

When inflation rates are on the rise, your buying power, also known as the “value of a dollar,” may go down. While inflation is typically gradual, if rates rise at a faster-than-average pace, then the value of your dollar may be lowered more than usual.

For example, in January 2022, inflation rates rose to 7.5%, the largest increase in 40 years. With historical increases like this you may directly feel the effect — especially if your salary doesn’t go up at the same rate. High inflation rates may also be particularly challenging to people who are on a fixed income.

But the good news is that wages often rise with inflation, though it’s not always at the same or greater rate. Finding a way to get a raise with your current employer or landing a job that pays more may help combat the effects of inflation on your budget.

Inflation may also force you to adjust your investment decisions. While it’s a good idea to maintain short-term savings in a high-yield savings account or certificate of deposit, those accounts don’t often offer interest rates that keep up with inflation. So you may want to shift some of your long-term savings over to an investment account that can offer higher returns over time.

Read more about the effects of inflation.