A number on a statement is nominalThe face value — the headline figure, before adjusting for what money can buy. Your account balance is a nominal amount.: it counts units of currency, not what they buy. Inflation quietly erodes that buying power, so the realThe nominal amount restated in today's prices — what it would actually buy. Real value strips inflation back out so two years' figures are comparable. value — what the money is worth in today's prices — grows slower, and can shrink even as the nominal figure climbs. The gap is the compounding you see, minus the compounding you don't.
Your €10 000 grows to €26 533 on paper after 20 years, but at 3% inflation that buys only €14 691 in today's money — still ahead of where you started.
The bright line is the nominal balance — the figure you'd see. The faint line is its real value in today's money, and the shaded wedge between them is the purchasing power inflation skims off: €11 842 by year 20. The wider the wedge, the more the headline number flatters you.
| Inflation | Real value in 20 yr |
|---|---|
| 0% | €27k+5% real |
| 2% | €18k+2.94% real |
| 3%now | €15k+1.94% real |
| 5% | €10k0% real |
| 8% | €5,7k−2.78% real |
| 12% | €2,8k−6.25% real |
Hold the nominal growth fixed and let inflation climb: the real value after 20 years falls, and once inflation overtakes your 5% nominal rate the real return turns negative — you end up with less buying power than you started. Click a rate to load it above.