How much would £20000 be worth in ten and twenty years time

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donmaico
donmaico Posts: 376 Forumite
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in Savings & investments
Given 3% annual inflation and an interest rate of 1.5%? I know its impossible to predict what inflation rates will be or, for that matter, interest rates but there must be an online calculator one can use purely for academic purposes but I just can't find one
Argentine by birth,English by nature
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  • jimjames
    jimjames Posts: 17,622 Forumite
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    If you put in a spreadsheet that it will drop by 1.5% per year then you'll get the result. Or in calculator and keep pressing the = button after each result.

    By my calcs after 20 years each £1 would be worth 75p. So £20k would be worth £15k.

    That's the reason people invest rather than save over the long term
    Remember the saying: if it looks too good to be true it almost certainly is.
  • Bravepants
    Bravepants Posts: 1,503 Forumite
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    In a handheld calculator type this:

    cash*(1-(interest-inflation))^years

    Where * is multiplication operator,
    ^ is power operator (for example 2^2 is 2 squared, which is 4)
    inflation and interest are expressed as decimal rather than percentages, e.g. 1.5% is 0.015...3% is 0.03. Just divide the percentage by 100.

    So your 20 year example for £20,000 would be:

    20000*(1-0.015)^20

    = £14782
    If you want to be rich, live like you're poor; if you want to be poor, live like you're rich.
  • donmaico
    donmaico Posts: 376 Forumite
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    jimjames wrote: »
    If you put in a spreadsheet that it will drop by 1.5% per year then you'll get the result. Or in calculator and keep pressing the = button after each result.

    By my calcs after 20 years each £1 would be worth 75p. So £20k would be worth £15k.

    That's the reason people invest rather than save over the long term

    Yes, indeed and I do have some investments. My FI reckons I should have 50/50 cash/investment. At the moment it stands at 66/34 so I am wondering whether to increase the investment side but given the current uncertainty re the economy, I am somewhat hesitant.On top of that my "cautious" investment( 5 funds) whilst they have over a 5 year period grown y by between 7-9%.Since I took them out 7months ago they have dropped to about 2-3% which isn't exactly ideal. Then again they could well pick up again so now might be a good time to put in some extra funds in the form of small lump sums.
    Argentine by birth,English by nature
  • donmaico
    donmaico Posts: 376 Forumite
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    edited 7 January 2018 at 2:44PM
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    Bravepants wrote: »
    In a handheld calculator type this:

    cash*(1-(interest-inflation))^years

    Where * is multiplication operator,
    ^ is power operator (for example 2^2 is 2 squared, which is 4)
    inflation and interest are expressed as decimal rather than percentages, e.g. 1.5% is 0.015...3% is 0.03. Just divide the percentage by 100.

    So your 20 year example for £20,000 would be:

    20000*(1-0.015)^20

    = £14782

    Mindboggling( Long time since i have done any form of maths).Do you subtract .015 from 1 then multiply by 20000 which gives 19700.How do i get to 14782? (says he absolutely bewildered)
    Jims method may not be as accurate but it is a heck of a lot simpler :)
    Argentine by birth,English by nature
  • firestone
    firestone Posts: 520 Forumite
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    donmaico wrote: »
    Given 3% annual inflation and an interest rate of 1.5%? I know its impossible to predict what inflation rates will be or, for that matter, interest rates but there must be an online calculator one can use purely for academic purposes but I just can't find one
    A quick search found lump sum calculators that while not UK should work for what you want and you can add inflation/interest rates and duration one is calculatorsoup -investor inflation calculator or Lump sum calculator - capital solutions Gurgaon
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    donmaico wrote: »
    Yes, indeed and I do have some investments. My FI reckons I should have 50/50 cash/investment. At the moment it stands at 66/34 so I am wondering whether to increase the investment side but given the current uncertainty re the economy, I am somewhat hesitant.On top of that my "cautious" investment( 5 funds) whilst they have over a 5 year period grown y by between 7-9%.Since I took them out 7months ago they have dropped to about 2-3% which isn't exactly ideal. Then again they could well pick up again so now might be a good time to put in some extra funds in the form of small lump sums.

    Who is your “FI”?

    Anyway, 50/50 seems very cautious. Is that because you are cautious or the FI is cautious or ..... ?

    Also, you say “given the current uncertainty re the economy”
    First , there’s always uncertainty not just about the economy but everything, amd second which economy? The wold economy? U.K.? Somewhere else ?
  • Mchambers
    Mchambers Posts: 1,054 Forumite
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    OP.....How long is a piece of string ?:D
  • ruperts
    ruperts Posts: 3,673 Forumite
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    edited 7 January 2018 at 3:33PM
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    1/1.015^20*20000=14849

    Basically 1.015^20 gives you compound interest of 1.5% over 20 periods (years in this case)

    1/1.015^20 gives you the reverse of that.

    Multiply by 20,000 because that’s how much you’ve got now.
  • jimjames
    jimjames Posts: 17,622 Forumite
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    donmaico wrote: »
    Jims method may not be as accurate but it is a heck of a lot simpler :)

    It's just as accurate :) I'd just shortened the number and also taken year 1 as £1. Calculation comes out at exactly the same £14782 if your run it

    Basically multiple by 0.985 for every year you want to account for
    Remember the saying: if it looks too good to be true it almost certainly is.
  • donmaico
    donmaico Posts: 376 Forumite
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    AnotherJoe wrote: »
    Who is your “FI”?

    Anyway, 50/50 seems very cautious. Is that because you are cautious or the FI is cautious or ..... ?

    Also, you say “given the current uncertainty re the economy”
    First , there’s always uncertainty not just about the economy but everything, amd second which economy? The wold economy? U.K.? Somewhere else ?

    Apologies I meant FA :D, financial adviser

    UK mainly,(although there is a global element),bonds, securities,passive funds,properties 3,20-60% shares . My FA seemed to think Brexit is a very bad thing, particularly the hard version. I would tend to agree with him although obviously, not from his perspective as I have little or no understanding of how businesses or investment funds work.Still, next time I see him he may well suggest changing the portfolio and look abroad rather like John Redwood did with his clients
    Argentine by birth,English by nature
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