Inflation Calculator

Use our inflation calculator to find out the value of USD and CAD currency between two separate years, from 1914 to today. You can also calculate how much your money was worth in the future or the past. Enter an example inflation rate and how many years forward or back to get an instant, color-coded answer with our free and easy-to-use inflation calculator.

How to Use the Inflation Calculator

Our inflation calculator allows users to calculate the value of USD and CAD between two years or determine how inflation affects money moving forward or backward in time. Here’s how you can use the calculator:

1. Select the Currency
   Choose either USD (US Dollar) or CAD (Canadian Dollar) from the dropdown menu.
2. Choose the Calculator Mode
   • Inflation Rate: Enter the start and end years to calculate the total inflation rate and the value of money between those years.
   • Forward Inflation Rate: Input the current amount, the inflation rate, and the number of years to calculate the future value of your money.
   • Backward Inflation Rate: Input the current amount, the inflation rate, and the number of years to calculate the value of your money in the past.
3. Input Required Data
   • For Inflation Rate, enter the amount, start year, and end year (between 1914 and 2024).
   • For Forward Inflation Rate and Backward Inflation Rate, enter the amount, inflation rate (default is 3%), and the number of years forward or backward.
4. Click Calculate
   Once all fields are filled in, press the “Calculate” button to see the results. The results will include:
   • Adjusted values for the selected currency.
   • Total inflation rate for the given period.
   • A detailed, color-coded explanation for clarity.

Data Source

The inflation rates and calculations are based on the Consumer Price Index (CPI) data provided by official government and statistical agencies. The CPI tracks changes in the cost of a basket of goods and services over time and is widely used to measure inflation. The CPI values used in this calculator are from 1914 to the latest available year (2024) for both USD and CAD.

Examples of Calculations

• Example 1: Inflation Rate (USD)
  If you enter $100 for the start year 1914 and the end year 2024, the calculator will show the adjusted value as approximately $3,154.93, with a total inflation rate of 3,054.93%.
• Example 2: Forward Inflation Rate (CAD)
  If you input $1,000 CAD with a 3% inflation rate for 10 years, the result will show the future value as approximately $1,343.92 CAD after 10 years.
• Example 3: Backward Inflation Rate (USD)
  If you input $1,000 USD with a 3% inflation rate for 20 years ago, the result will show the value as approximately $553.68 USD, indicating how much $1,000 today was worth 20 years ago.

These examples shows how you can check the historical or future value of money using reliable CPI data.

Inflation Chart

Here is a chart showing the inflation Consumer Price Index (CPI) data for CAD and USD from 1914 to 2024. It shows the trends and growth in CPI values over the years for both currencies.

Why Is Inflation Important to Understand?

Inflation rates can affect you in ways you might not yet realize, especially if you’re a new business owner. Inflation rates should be understood by all types of entities, from individuals to government agencies. Below, we break down the effects of inflation across different areas of the working sector with detailed explanations.

1. Impact on Purchasing Power

Inflation directly affects the purchasing power of money.

What is Purchasing Power?
Purchasing power refers to the amount of goods and services that a unit of currency can buy. Over time, inflation reduces the value of money, meaning your money is worth less, and you can buy less with the same amount.

Example:
If inflation is 2% annually, an item that costs $100 today will cost $102 next year. This decrease in purchasing power makes understanding inflation critical for running a business or purchasing items for personal use.

2. Effect on Savings and Investments

Inflation diminishes the real value of savings and investments, regardless of what banks may advertise.

Savings:
Money kept in a standard savings account with low interest rates may lose value over time if the inflation rate exceeds the interest rate. Inflation rates are typically higher than the income earned from savings accounts.

Investments:
Fixed-income investments like bonds may not keep up with inflation, reducing their real returns. In contrast, assets like stocks or real estate often grow in value faster than inflation, making them more inflation-resistant, though they come with a higher risk.

Example:
A savings account earning 1% interest while inflation is 3% results in a net loss of 2% in purchasing power each year.

3. Influence on Wages and Income

Inflation impacts wages and income, which can either lag behind or outpace inflation rates.

Wage Adjustments:
Employers may periodically adjust wages to account for inflation. However, if wage increases do not match inflation, workers may struggle with rising living costs. With average inflation rates at 3%, earning at least 3% more annually is necessary to maintain purchasing power.

Real Income:
Real income measures the purchasing power of your earnings after adjusting for inflation. A higher inflation rate without corresponding wage increases decreases real income, making it harder to cope financially.

Example:
If your annual salary increases by 2% but inflation is 3%, your real income effectively decreases by 1%. If your employer offers a raise, ensure it at least matches the inflation rate for that year.

4. Role in Setting Interest Rates

Inflation is a major factor in determining interest rates in the economy.

Central Banks and Inflation Control:
Central banks, like the Federal Reserve in the U.S. or the Bank of Canada, monitor inflation closely. They adjust interest rates to either stimulate the economy (during low inflation) or control excessive inflation.

Borrowing Costs:
High inflation often leads to higher interest rates, increasing borrowing costs for mortgages, loans, and credit cards. Banks typically announce surprising rate cuts or increases, and economists often try to predict these changes.

5. Planning for Retirement

Inflation significantly affects long-term financial goals, particularly retirement planning.

Cost of Living:
Retirees must account for inflation to ensure their savings last. Underestimating inflation can lead to outliving their savings, creating financial difficulties.

Adjusting Retirement Plans:
Tools like inflation-adjusted annuities or investments in growth assets can help protect retirement savings. When there’s no way to beat inflation through investment, recessions may begin, impacting personal savings and major businesses alike.

Example:
If your retirement expenses are $40,000 annually and inflation averages 3%, in 20 years, you’ll need over $72,000 to maintain the same standard of living.

If you think you’ll never need to understand how inflation works, think again. Increased inflation affects everyone—from single individuals managing their living expenses to large families and seniors. Understanding the value of money and the impact of inflation is essential for navigating the financial challenges of today and tomorrow.

Inflation Facts

1. Historical Inflation Rates

• The average inflation rate in the United States over the last century is approximately 3.2% per year.
• Canada has experienced an average annual inflation rate of about 3% since 1914.

2. Highest Recorded Inflation Rates

• The U.S. experienced its highest inflation rate in June 1980, reaching 14.76%.
• Canada’s inflation peaked in January 1981 at 12.9%.

3. Hyperinflation

• Hyperinflation is defined as a monthly inflation rate exceeding 50%.
• The highest recorded hyperinflation occurred in Hungary in 1946, where prices doubled every 15 hours.

4. Deflation

• Inflation is not always positive; deflation refers to a general decrease in prices.
• The U.S. experienced deflation during the Great Depression, with prices dropping nearly 10% annually in the early 1930s.

5. Impact on Currency Value

• Inflation reduces the purchasing power of currency over time.
• A U.S. dollar in 1914 is equivalent to roughly $30 today in terms of purchasing power.

6. Role of Central Banks

• Central banks, such as the Federal Reserve in the U.S. and the Bank of Canada, aim to maintain inflation rates between 2% and 3%.
• This range is considered optimal for economic growth while preserving purchasing power.

7. Global Inflation Trends

• Developing countries often experience higher inflation rates due to economic instability.
• Advanced economies typically maintain lower and more stable inflation rates.

8. Inflation Indexes

• The Consumer Price Index (CPI) is the most commonly used measure of inflation.
• The CPI tracks the average price change of a basket of goods and services over time.

9. Inflation and Wages

• To maintain purchasing power, wages need to increase at least at the rate of inflation annually.
• Real wage growth occurs when wage increases outpace inflation.

10. Inflation and Investments

• Inflation erodes the value of fixed-income investments like bonds.
• Assets such as real estate, commodities, and stocks are considered more resilient to inflation.

11. Inflation and Savings

• Savings in accounts with low interest rates may lose value over time due to inflation.
• Inflation-protected securities, such as Treasury Inflation-Protected Securities (TIPS), help preserve purchasing power.

12. Recent Inflation Trends

• In 2022, global inflation surged due to supply chain disruptions and rising energy costs, with the U.S. inflation rate peaking at 9.1% in June.
• Canada recorded a 2022 inflation peak of 8.1%, the highest in nearly 40 years.

Knowing some of these facts might help you get a sense of how bad inflation rates can get. Sometimes I amaze myself just by reading some news on inflation. And sometimes the news is extremely overwhelming and makes me think of doing a different investment or saving strategy. It’s best to always do your own research when it comes to your personal finances.

Believe it or not, there are actual investment products designed specifically to help against inflation. For me, I have a hard time trusting someone when it comes to my own money, which is why I won’t link to any such investment program. It’s usually the government’s responsibility to protect us against inflation, but unfortunately, most government agencies have this last on their list of priorities.