Investing Basics

What Is Purchasing Power?

Purchasing power is the quantity of goods and services that a unit of money can buy. When prices rise because of inflation, the same amount of money buys less, so purchasing power falls. When incomes or savings grow faster than prices, purchasing power rises.

How to Estimate It

Future purchasing power of an amount = amount ÷ (1 + inflation rate)^years. At 3% inflation, 1,000 has the purchasing power of about 744 in today's terms after ten years.

Purchasing Power and Income

A pay raise increases purchasing power only if it is larger than the inflation rate over the same period; this is the difference between a nominal and a real raise.

🧮 Calculate It Yourself

Put Purchasing Power into practice with these free calculators — no sign-up, nothing stored.

🎈 Inflation Calculator Future cost and buying power of money for any inflation rate. Calculate → 📈 Raise Calculator Find your new pay after a raise — by percentage or dollar amount. Calculate →

🔗 Related Terms

Inflation Real Rate of Return Pay Raise Cost-of-Living Adjustment (COLA)

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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.