How Inflation Eats Into Your Savings
A plain explanation of inflation, how to calculate the future cost of your goals, and what a real return means.
Inflation is the rise in prices over time. If prices rise 6% a year, something that costs ₹100 today costs about ₹179 after 10 years, and about ₹321 after 20 years. Money kept idle buys less each year.
Future cost of a goal
Future cost = today's cost × (1 + inflation)years. A ₹25 lakh education goal in 15 years at 6% inflation needs about ₹60 lakh. Plan your investment amount for the inflated figure, not today's price, using the SIP calculator or the lumpsum calculator.
Real return
Your real return is roughly your return minus inflation, adjusted for tax. If an FD pays 7% before tax, you are in the 30% slab and inflation is 6%, your after-tax return is about 4.9%, and the real return is below 0%. That is why long-term goals usually need some growth assets alongside safe ones. Compare the two with the SIP vs FD calculator.
Practical steps
- Keep an emergency fund in safe instruments, but not more than needed.
- For goals more than five years away, consider a mix that includes equity, according to your risk tolerance.
- Raise your SIP every year; see the step-up SIP guide.
Inflation figures here are illustrations. Actual rates vary by year and by item.
Frequently asked questions
What inflation rate should I assume for planning?
Many planners use 5–6% for general costs and 8–10% for education and healthcare, but treat these as assumptions.
Is an FD enough to beat inflation?
After tax, FD returns are often close to or below inflation, especially for higher slabs.
More guides
Calculators
Last reviewed: October 2026. General education, not financial advice.