Inflation Calculator: To effectively save for the long term and accumulate a substantial corpus, it is essential to undertake several actions simultaneously. Initiating your savings early is crucial, as is constructing a portfolio that aligns with your objectives through appropriate asset allocation.

When considering investments, it is imperative to account for inflation. The continuous increase in prices can elevate the cost of your financial goals, meaning that by the time you are prepared to fulfill these needs, their expenses may have significantly risen.

Consequently, the purchasing power of currency diminishes over time due to inflation. For instance, if your objective is to save Rs 1 crore for a goal set 30 years in the future, the value of that Rs 1 crore will be approximately Rs 23 lakh in 30 years.

Also Read: Public Provident Fund: How PPF can help double your money

This indicates that despite earning returns on your savings, inflation will erode those gains. The net result is a corpus that equals Rs 1 crore, yet in today’s terms its value is only about Rs 23 lakh. Moreover, if you aim to save Rs 1 crore, you will fall considerably short of achieving that target in 30 years.

To meet a goal that currently costs Rs 1 crore, you will need approximately Rs 4.32 crore in 30 years. Having recognized the impact of inflation on your savings, it is vital to begin investing with inflation considerations in mind.

If your target, at today’s value, is Rs 25 lakh and you wish to achieve this goal in 10 years, you can use the following Excel formula to determine the adjusted amount (future worth) after 10 years, assuming an annual inflation rate of 5 percent.

Reduced amount = amount/(1 + inflation rate)^number years

= 2500000 / (1+.05)^10

= Rs 15.34 lakh

To account for inflation, it is necessary to save a greater sum. The formula for determining the required amount is as follows:

Required amount = amount * (1 + inflation rate)^number years

= 2500000 * (1+.05)^10
= Rs 40.72 lakh

To counteract the effects of inflation and preserve equivalent value, it is essential to save for the increased cost rather than the current cost. Consequently, instead of aiming to save Rs 25 lakh, one must target a savings goal of Rs 40.72 lakh to comfortably achieve the objective in 10 years.