$5 in 2020 is worth $5.72 today.
The value of $5 from 2020 to 2022
$5 in 2020 has the purchasing power of about $5.72 today, a $0.72 increase in 2 years. Between 2020 and today, the dollar experienced an average annual inflation rate of 6.99%, resulting in a cumulative price increase of 14.48%.
According to the Bureau of Labor Statistics consumer price index, today's prices are several times higher than the average price since 2020.
In 2020, the inflation rate was 1.23%. Inflation is now 8.52% higher than it was last year. If this figure holds true, $5 today will be worth $47.6 next year in purchasing power.
Inflation from 2020 to 2022
| Summary | Value |
|---|---|
| Cumulative price change (from 2020 to today) | 14.48% |
| Average inflation rate (from 2020 to today) | 6.99% |
| Converted amount | $5.72 |
| Price Difference | $0.72 |
| CPI in 2020 | 258.812 |
| CPI in 2022 | 296.276 |
| Inflation in 2020 | 1.23% |
| Inflation in 2022 | 8.52% |
| $5 in 2020 | $5.72 in 2022 |
Buying power of $5 in 2020
If you had $5 in your hand in 2020, its adjusted value for inflation today would be $5.72. Put another way, you would need $5.72 to beat the rising inflation. When $5 becomes equivalent to $5.72 over time, the "real value" of a single US dollar decreases. In other words, a dollar will pay for fewer items at the store.
This effect explains how inflation gradually erodes the value of a dollar. By calculating the value in 2020 dollars, it's evident how $5 loses its worth over 2 years.
Dollar inflation for $5 from 2020 to 2022
The below tabular column shows the effect of inflation on $5 in the year 2020 to the year 2020.
| Year | Dollar Value | Inflation Rate |
|---|---|---|
| 2020 | 5 | 1.23% |
| 2021 | 5.23 | 4.70% |
| 2022 | 5.73 | 8.52% |
Conversion of 2020 dollars to today's price
Based on the 14.48% change in prices, the following 2020 amounts are shown in today's dollars:
| Initial value | Today value |
|---|---|
| $1 dollar in 2020 | $1.14 dollars today |
| $5 dollars in 2020 | $5.72 dollars today |
| $10 dollars in 2020 | $11.45 dollars today |
| $50 dollars in 2020 | $57.24 dollars today |
| $100 dollars in 2020 | $114.48 dollars today |
| $500 dollars in 2020 | $572.38 dollars today |
| $1,000 dollars in 2020 | $1144.75 dollars today |
| $5,000 dollars in 2020 | $5723.77 dollars today |
| $10,000 dollars in 2020 | $11447.54 dollars today |
| $50,000 dollars in 2020 | $57237.69 dollars today |
| $100,000 dollars in 2020 | $114475.37 dollars today |
| $500,000 dollars in 2020 | $572376.86 dollars today |
| $1,000,000 dollars in 2020 | $1144753.72 dollars today |
How to calculate the inflated value of $5 in 2020
To calculate the change in value between 2020 and today, we use the following inflation rate formula:
CPI Today / CPI in 2020 x USD Value in 2020 = Current USD Value
By plugging the values into the formula above, we get:
296.276/ 258.812 x $5 = $5.72
To buy the same product that you could buy for $5 in 2020, you would need $5.72 in 2022.
To calculate the cumulative or total inflation rate in the past 2 years between 2020 and 2022, we use the following formula:
CPI in 2022 - CPI in 2020 / CPI in 2020 x 100 = Cumulative Inflation Rate
By inserting the values to this equation, we get:
( 296.276 - 258.812 / 258.812) x 100 = 14.48%
Alternate method to calculate today's value of money after inflation - Using compound interest formula
Given that money changes over time due to inflation, which acts as compound interest, we can use the following formula:
FV = PV (1+i/100)^n
where,
- FV = Future value
- PV = Present value
- i: Average interest rate (inflation)
- n: Number of times the interest is compounded (i.e. # of years)
The future value in this case represents the amount obtained after applying the inflation rate to our initial value. In other words, it indicates how much $5 is worth today. We have 2 years between 2022 and 2020. The average inflation rate was 6.9931643072381%.
Plugging in the values into the formula, we get:
5 (1+ % 6.99/ 100 ) ^ 2 = $5.72