Do you get amazed when your parents tell that the piece of land that costs in Crores today is something they bought at less than a lac 25 years back. Well, that’s inflation and purchasing power at play and to do exercise control over your financial planning, you must be aware of the formula that can tell you how much today’s ₹10,000 will be worth 10 years down the line, if Inflation Rate was same at 3.8% (2017 stats).
Future Amount = Present Amount * (1+Inflation Rate) ^ Number of Years
10,000*(1+3.8%) ^10 = ₹14,520/-
That means today’s ₹10,000 will be equivalent to ₹14,520/- 10 years down the line.
Therefore, if you wish to know the equated amount of your today’s savings 10 years from now, just replace the ₹10,000 above with your savings amount and see what the number turns out to be.
Speaking of inflation, another formula that deserves to be cited here is the Purchasing Power formula. Which means what purchasing power will today’s ₹10,000 hold 10 years down the line, given the inflation rate same at 3.8%.
Purchasing Power Formula:
Future Value = Present Value/(1+ Inflation Rate) ^ Number of Years
10,000/(1+3.8%) ^10 = ₹6887/-
Which means, the value of today’s ₹10,000 will decline and will have a purchasing power worth ₹6887/- only in the times to come.