Inflation in Singapore: 5 Mistakes to Avoid
Shows how inflation changes prices and purchasing power. The maths is not complicated, but a handful of errors come up again and again in this and related loans & finance calculations. Here is what to watch for.
Inflation erodes buying power, so a savings goal set in today's dollars needs to be adjusted upwards for the years it will take to reach it. Singapore's core inflation has varied widely over the past decade, so it is worth testing a range of rates.
Interest in Singapore is quoted in several ways. Mortgages and savings accounts use effective annual rates, while car loans and many personal loans are advertised at flat rates that look much lower than their true cost. Banks must disclose the effective interest rate, and comparing on that basis gives a fair picture.
1. Comparing flat rates with effective rates
A 3% flat rate can be close to 5.5% effective because interest is charged on the original amount for the whole term.
2. Forgetting inflation
S$1 million in 30 years will buy much less than S$1 million today.
3. Only looking at the monthly payment
A longer tenure lowers the instalment but raises the total interest paid.
4. Mixing monthly and annual rates
Divide annual rates by 12 for monthly calculations and keep periods consistent.
5. Paying only the minimum on a card
Minimum payments barely cover interest, so balances can take years to clear.
The correct method
Future cost = amount × (1 + i)^t.
For example, with these inputs:
- Amount today (S$): 1,000
- Inflation rate (% a year): 2.5
- Years: 10
the calculator returns:
- Future cost of the same basket: S$1,280.08
- Buying power of today's amount: S$781.20
Related calculations
- Annuity Payout Calculator: Finds the monthly income a lump sum can pay over a set period.
- Commission Calculator: Works out commission, such as a property agent's fee.
- Freelance Hourly Rate Calculator: Sets a freelance rate that covers income targets and costs.
- Electricity Bill Calculator: Estimates your electricity bill.
The Inflation Calculator applies the formula consistently, so it is a quick way to double-check your own working.
Run your own numbers: Inflation Calculator