Inflation Formula Explained, With Examples
Every inflation result comes from one formula. Once you understand what goes into it, you can sanity-check any figure you are given, whether by an employer, a bank, a teacher or another website.
The formula
Future cost = amount × (1 + i)^t.
What each input means
- Amount today (S$): the value you enter in the calculator.
- Inflation rate (% a year): the value you enter in the calculator.
- Years: the value you enter in the calculator.
Example
For example, with these inputs:
- Amount today (S$): 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$781.20
How the result changes
The table keeps the other inputs at their example values and changes amount today (s$).
| Amount today (S$) | Future cost of the same basket | Buying power of today's amount |
|---|---|---|
| 1,000 | S$1,280.08 | S$781.20 |
| 500 | S$640.04 | S$390.60 |
| 750 | S$960.06 | S$585.90 |
| 1,250 | S$1,600.11 | S$976.50 |
| 1,500 | S$1,920.13 | S$1,171.80 |
Why it matters
Interest rates, instalments and returns compound over years, so a small difference in rate or tenure turns into thousands of dollars. Working the numbers out yourself makes it easier to compare bank offers, avoid expensive debt and plan savings goals.
Compounding is the reason long-term saving works: returns earn further returns, so the growth curve steepens over time. The same maths works against you with debt, which is why credit card balances at around 27% a year grow quickly if only minimum payments are made.
Calculators make it easy to compare scenarios side by side: a shorter tenure versus a lower instalment, a higher deposit versus more cash in hand, or paying down debt versus investing. Seeing the total cost, not just the monthly figure, usually makes the better choice obvious.
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.
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.
Use the Inflation Calculator to plug in your own numbers.
Run your own numbers: Inflation Calculator