How inflation erodes purchasing power over time.
Real value in today's money
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Future amount needed
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Purchasing power lost
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Your breakdown
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Why a fixed sum quietly shrinks
Cash does not lose its face value, but it loses its buying power. A note that says $100,000 will still say $100,000 in a decade, yet the basket of groceries, rent, and dim sum it can buy will be smaller. This calculator puts a number on that erosion. It compounds your chosen inflation rate over the years you set, then shows three things: what today's sum will be worth in real terms later, how much you would need in future to buy what the sum buys now, and the slice of purchasing power lost along the way.
It is built for savers deciding whether parking money in a low-interest account is safe, retirees stress-testing a fixed pot against rising prices, and anyone setting a long-range goal who wants tomorrow's target in today's money. Hong Kong tracks prices through the Composite Consumer Price Index published by the Census and Statistics Department, and underlying inflation has tended to run in the low single digits in recent years. The tool uses whatever rate you type, so look up the latest CPI reading and adjust it for your own spending mix rather than trusting a single headline number.
The compounding maths in plain terms
Inflation compounds the same way interest does, just working against you. The tool raises one plus your annual rate to the power of the number of years to get an inflation factor, then divides your sum by that factor to find its real value, and multiplies by the same factor to find the future amount needed. Small rates look harmless over one year and bite hard over twenty, because the factor grows geometrically.
$100,000 at 2.5 percent over ten years
Using the defaults, $100,000 at 2.5 percent average inflation for ten years gives an inflation factor of about 1.28. Today's $100,000 will buy what roughly $78,120 buys now, you would need about $128,008 in ten years to match today's spending power, and you have lost around $21,880, or 21.9 percent of your purchasing power.
The teal line is what your money is really worth; the dashed line is the unchanged face value. The widening gap between them is inflation at work.
Where inflation meets the rest of your finances
Two Hong Kong specifics make this calculator more than an abstract exercise. First, deposit interest is not taxed here, and there is no tax on dividends or capital gains, so every percentage point a savings or investment account earns counts in full toward outpacing inflation. The relevant comparison is simple: if your account pays less than the CPI rate, you are losing ground in real terms even though the balance is rising. Second, salaries tax allowances and many statutory caps are set in nominal dollars and are only adjusted when the Budget chooses to, so a frozen allowance quietly tightens as prices climb. Treat any allowance figure you see as the value for that year and confirm the current one with the Inland Revenue Department.
A practical tip: do not run this with an interest rate in the inflation box. The field wants the rate at which prices rise, not the return on your savings. If you want to know whether you are getting ahead, run the inflation figure here, then compare it with your account's rate separately.
Is Hong Kong's official CPI the right rate for me?
It is a starting point, not a personal figure. The Composite CPI weights a typical household basket, but if a large share of your spending goes on rent, schooling, or imported goods, your personal inflation rate can run higher than the headline. Look at the category breakdowns the Census and Statistics Department publishes and lean toward the rate that matches where your money actually goes.
Should I use the same rate for a 30-year projection as a 5-year one?
Be more cautious over long horizons. A single average rate is reasonable for a few years, but over decades inflation can swing through high and low spells. For a long projection, it is worth running the tool two or three times at different rates to see a range rather than betting on one number, since the compounding makes the gap between, say, 2 and 4 percent enormous by year 30.