What £2,000 is worth after 40 years of 2% inflation
After 40 years of 2% inflation, what £2,000 buys today will cost £4,416, and £2,000 held in cash will buy only £906 worth of today's goods, a loss of 54.71%.
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The numbers for these inputs
| Year | Cost of the same goods | Buying power of the amount | Buying power lost |
|---|---|---|---|
| 1 | £2,040 | £1,961 | 1.96% |
| 2 | £2,081 | £1,922 | 3.88% |
| 3 | £2,122 | £1,885 | 5.77% |
| 4 | £2,165 | £1,848 | 7.62% |
| 5 | £2,208 | £1,811 | 9.43% |
| 6 | £2,252 | £1,776 | 11.2% |
| 7 | £2,297 | £1,741 | 12.94% |
| 8 | £2,343 | £1,707 | 14.65% |
| 9 | £2,390 | £1,674 | 16.32% |
| 10 | £2,438 | £1,641 | 17.97% |
| 11 | £2,487 | £1,609 | 19.57% |
| 12 | £2,536 | £1,577 | 21.15% |
| 13 | £2,587 | £1,546 | 22.7% |
| 14 | £2,639 | £1,516 | 24.21% |
| 15 | £2,692 | £1,486 | 25.7% |
| 16 | £2,746 | £1,457 | 27.16% |
| 17 | £2,800 | £1,428 | 28.58% |
| 18 | £2,856 | £1,400 | 29.98% |
| 19 | £2,914 | £1,373 | 31.36% |
| 20 | £2,972 | £1,346 | 32.7% |
| 21 | £3,031 | £1,320 | 34.02% |
| 22 | £3,092 | £1,294 | 35.32% |
| 23 | £3,154 | £1,268 | 36.58% |
| 24 | £3,217 | £1,243 | 37.83% |
| 25 | £3,281 | £1,219 | 39.05% |
| 26 | £3,347 | £1,195 | 40.24% |
| 27 | £3,414 | £1,172 | 41.41% |
| 28 | £3,482 | £1,149 | 42.56% |
| 29 | £3,552 | £1,126 | 43.69% |
| 30 | £3,623 | £1,104 | 44.79% |
| 31 | £3,695 | £1,082 | 45.88% |
| 32 | £3,769 | £1,061 | 46.94% |
| 33 | £3,844 | £1,040 | 47.98% |
| 34 | £3,921 | £1,020 | 49% |
| 35 | £4,000 | £1,000 | 50% |
| 36 | £4,080 | £980 | 50.98% |
| 37 | £4,161 | £961 | 51.94% |
| 38 | £4,245 | £942 | 52.88% |
| 39 | £4,329 | £924 | 53.81% |
| 40 | £4,416 | £906 | 54.71% |
How it works
Inflation compounds like interest. If prices rise by a steady rate each year, goods that cost one amount today cost amount x (1 + rate)^years after that many years.
The other side of it is buying power: money held in cash for that long buys only amount / (1 + rate)^years of today's goods.
Real inflation changes from year to year and differs between goods, so a single steady rate is an illustration. Use it to see the size of the effect, not to predict a price.
Common mistakes
- Ignoring inflation when judging a savings rate: a 3% account in a 3% inflation year gains nothing in real terms.
- Using the average inflation of one country for a price in another.
- Assuming every price rises at the headline rate; housing, food and electronics move differently.
Questions
How much will £2,000 of goods cost in 40 years?
£4,416 at 2% a year.
What will £2,000 be worth in 40 years?
In today's buying power, £906: inflation takes away 54.71% of it.
What inflation rate should I use?
Many central banks aim for about 2%; use the average rate of your country over a long period rather than one recent year.
How do I protect savings from inflation?
Earn a return at or above inflation: compare the interest rate with the inflation rate, and see the compound interest calculator for the effect of growth.
More inflation examples
- What $1,000 is worth after 10 years of 3% inflation
- What $1,000 is worth after 20 years of 3% inflation
- What $1,000 is worth after 30 years of 3% inflation
- What $10,000 is worth after 10 years of 2% inflation
- What $10,000 is worth after 10 years of 4% inflation
- What $50,000 is worth after 25 years of 3% inflation
- What $100,000 is worth after 30 years of 2.5% inflation
- What $100,000 is worth after 20 years of 5% inflation
- What $5,000 is worth after 5 years of 6% inflation