Time Value of Money
One math, two perspectives. Compound Growth shows what your money grows to. Inflation Erosion shows how much purchasing power you lose. Switch modes to see both sides of the same equation.
Methodology. Compound interest: A = P × (1 + r/n)^(n×t), with n = compounding frequency per year. Inflation: Future cost = P × (1+i)^t (annual compounding). Purchasing power = P ÷ (1+i)^t. Same underlying math — one shows growth, the other shows erosion. India long-term inflation: ~6% (CPI). Real returns = nominal rate – inflation rate.
One formula, two views
Growth: future value = present value × (1 + r)n. Inflation erosion: real value = amount ÷ (1 + inflation)n. They are the same maths seen from opposite sides — your money has to grow faster than prices just to stand still.
Worked examples (10 years)
| Scenario | Result |
|---|---|
| ₹1 lakh growing at 12% | ≈ ₹3.11 lakh |
| ₹1 lakh of buying power after 6% inflation | ≈ ₹55,800 in today’s money |
| ₹1 lakh in a savings account at 3% vs 6% inflation | Real value falls to ≈ ₹75,000 |
The rule of 72
Divide 72 by the annual rate to estimate doubling time: at 12% money doubles in about 6 years; at 6% inflation prices double in about 12 years. Our rule of 72 guide has more examples.
Real return is what matters
Real return ≈ nominal return − inflation (more precisely (1+r)/(1+i) − 1). An FD at 7% taxed at 30% leaves about 4.9%, which is below 6% inflation — a negative real return. See how inflation affects your savings.
FAQs
What inflation rate should I use?
5–6% for general expenses over long periods; 8–10% or more for education and healthcare.
Is compounding annual or monthly here?
Annual. Monthly compounding gives slightly higher growth at the same rate.
Figures last checked October 2026. Calculator results are estimates; actual lender, fund or tax outcomes can differ.