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What is my return after inflation?

Real return

1.94%

after inflation · 3.06 points below the rate

On paper 12,763
Really worth 11,009
  • What it buys
  • What it says
  • You keep39%
  • Inflation takes61%

You set aside 10,000, and 5 years later it buys more than it did then.

If things change

Inflation −2 +2.02 points Inflation +2 −1.94 points

Someone like you Reset

Gulf saver 5% paid · 2% inflation Egypt saver 20% paid · 25% inflation Levant saver 8% paid · 6% inflation

It does not account for tax or fees · it measures one currency against its own inflation, so a rate earned in one place and spent in another is a different question · assuming the rate holds for the whole period

How it's worked out the exact formula, not the subtraction · what it assumes

What a savings rate leaves after inflation in the same currency, and what the balance actually buys. It does not account for tax or fees, and it measures one currency against its own inflation, so a rate earned in one place and spent in another is a different question.

After 5 years your bank statement says 12,763, and it buys what 11,009 buys today. The difference is 1,754, assuming the rate holds for the whole period.

What remains after inflation is (1 + rate) ÷ (1 + inflation) − 1. Not the rate minus inflation, which is the version most people carry in their heads.

The two agree closely at low numbers and part company where this region needs them most: 20% against 25% inflation is a loss of 4%, not 5%, because the erosion applies to the whole balance and not only to the return.

(1 + r) ÷ (1 + i) − 1

r is the rate the product pays; i is inflation in that same currency.

What it assumes

  • The rate is fixed for the whole period and compounds once a year. Real accounts reprice, usually downward.
  • Inflation is the same in every year. Where it is not, a single bad year does more damage than an average suggests.
  • Nothing is added to or withdrawn from the balance. Regular saving changes the outcome and this does not model it.
  • Tax is not modelled. Where income tax applies to interest, it comes off the nominal rate before this calculation starts, so enter the rate you actually receive rather than the advertised one.

ByNOUQUD Editorial Room

Updated

Our methodology

Terms used in this tool