Understanding the Power of Compound Growth vs Inflation
Make informed investment decisions by comparing how your money grows over time against inflation's impact
Interactive Calculators
Use these tools to visualize your investment growth potential and understand how inflation affects your purchasing power
Compound Interest Calculator
See how your investments can grow exponentially over time
Results shown with default values. Change any input below and click Calculate to see your personalized results.
Compound Interest means your money earns returns, then those returns earn returns, creating exponential growth over time.
Optional: Add regular monthly investments
S&P 500 historical average: ~10%
Enter your details and click Calculate
See how your wealth can grow over time
S&P 500 Historical Average Returns
Historical data shows: The S&P 500 has averaged ~10% annual returns over the long term. Past performance doesn't guarantee future results, but demonstrates the power of long-term investing.
Inflation Impact Calculator
Understand how inflation erodes your money's purchasing power over time
Results shown with default values. Change any input below and click Calculate to see your personalized results.
Inflation means prices rise over time, so your money buys less. Calculate how much value you'll lose.
UK average: 2-3% annually
Enter your details and click Calculate
See how inflation affects your money
UK Historical Inflation Averages
Beat inflation by investing: A 5-7% annual return can significantly outpace inflation and grow your wealth over time.
Understanding Nominal vs Real Returns: The Complete Picture
For those who want to understand the precise mathematics behind investment returns and inflation
🤔 The Question:
If you invest £10,000 at 8% for 30 years, you'll have £100,627. But what is that money actually worth in today's purchasing power after 30 years of 3% inflation?
📊 The Precise Calculation:
Nominal Investment Return
£10,000 invested at 8% annual return for 30 years
= £100,627 (nominal value)
Adjust for Inflation (Real Value)
£100,627 adjusted for 3% annual inflation over 30 years
Formula: £100,627 ÷ (1.03)30 = £100,627 ÷ 2.427
= £41,465 (real purchasing power in today's money)
Compare to Cash (No Investment)
£10,000 kept as cash, adjusted for 3% inflation over 30 years
= £4,120 (real purchasing power in today's money)
✅ The Real Benefit of Investing:
Investment real value: £41,465 (in today's purchasing power)
Cash real value: £4,120 (in today's purchasing power)
Real Wealth Gain: £37,345 in today's purchasing power
💡 Key Insights:
- •Nominal return (£100,627) is what you see in your bank account - the actual number of pounds
- •Real return (£41,465) is what that money can actually buy - its purchasing power in today's terms
- •Your real return rate is approximately 5% per year (8% investment return - 3% inflation)
- •Even though inflation reduces the value, investing still gives you 10x more real purchasing power than keeping cash (£41,465 vs £4,120)
🎯 Why This Matters:
The calculators above use a simplified comparison to help people understand the basic concepts. But for precise financial planning, you need to understand that both your investment returns and your cash are affected by inflation. The true measure of investment success is not just the nominal return, but the real return - how much purchasing power you've actually gained after accounting for inflation.