You might have heard your father or grandfather say that back in their days, they could buy plenty of household goods with just Rs 100. And if you’re around 40 now, you probably remember how even Rs 10 felt like a big amount in your childhood — enough for a decent breakfast outside. But times have changed. Today, that same breakfast might cost Rs 300–Rs 400. That’s what inflation has done to the value of money over the years.
Now imagine 20 years from today. Will Rs 10,000 still cover your monthly groceries? If your current household budget is around Rs 70,000, what will it look like two decades later? That’s the big question for anyone investing through an SIP (Systematic Investment Plan). It’s not just about how much you invest — it’s about what your money will actually be worth when you finally need it.
Where do investors go wrong?
One of the most common mistakes investors make in financial planning is not accounting for inflation. They often think in terms of fixed numbers — for example, setting a goal to build a corpus of Rs 50 lakh in 15 years or Rs 1 crore in 20 years — without considering what that amount will actually be worth in the future after adjusting for inflation. The key question is: will that corpus be sufficient to meet your financial goals in real terms?
That’s why financial advisors always recommend calculating the future value while planning.
Example:
Current expenditure on a task: Rs 50 lakh
Inflation: 5% per annum
Cost to complete the same task after 15 years: approximately Rs 1 crore
Cost after 20 years: Rs 1,32,66,489
It’s clear that after 15 years, the value of today’s Rs 50 lakh will effectively be around Rs 25 lakh, and after 20 years, it will drop to roughly 35–40% from its current value.
(Note: You can use AMFI’s Inflation Calculator to estimate future costs)
Rs 10,000 SIP: Actual value after 15 years
Monthly SIP: Rs 10,000
Expected return: 12% per annum
Total duration: 15 years
Inflation: 5% per annum
Total investment over 15 years: Rs 18,00,000
Inflation-adjusted return after 15 years: Rs 24,27,097
Real return: Rs 6,27,097
(Note: Without adjusting for inflation, the total value would be Rs 50,45,760)
Rs 10,000 SIP: Actual value after 20 years
Monthly SIP: Rs 10,000
Expected return: 12% per annum
Total duration: 20 years
Inflation: 5% per annum
Total investment over 20 years: Rs 24 lakh
Inflation-adjusted value after 20 years: Rs 37,65,683
Real return: Rs 13,65,683
(Note: Without adjusting for inflation, the total value would be Rs 99,91,479)
Real value of Rs 10,000 SIP after 25 years
Monthly SIP: Rs 10,000
Expected return: 12% per annum
Total duration: 25 years
Inflation: 5% per annum
Total investment over 25 years: Rs 30 lakh
Inflation-adjusted value after 25 years: Rs 56,03,769
Real return: Rs 26,03,769
(Note: Without adjusting for inflation, the total value would be Rs 1,89,76,350)
Disclaimer: The above content is for informational purposes only. Mutual Fund investments are subject to market risks. Please consult your financial advisor before investing.
Note: This content has been translated using AI. It has also been reviewed by FE Editors for accuracy.
