How Far $20K in Savings Got You in 2005 vs. Today
Inflation reduces the purchasing power of money each year. Seeing what $20,000 could have done a little more than 20 years ago demonstrates the value of investing, which remains one of the best ways to beat inflation.
That same money in 2005 has the same buying power as $34,926.06 in current U.S. dollars, according to the U.S. Bureau of Labor Statistics CPI Inflation Calculator. Let's explore how far that would get you in 2005 versus today.
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What Costs Have Gone Up The Most?
Almost everything is more expensive now than it was in 2005. Beef, electricity, concert tickets and fitness memberships are some of the expenses that have more than doubled over the past 20 years.
However, the biggest line items have also soared in recent years. The Federal Reserve Economic Data (FRED) shows a median home price of $232,500 at the start of 2005. Even after a recent dip, median housing prices are still $403,200. Higher housing prices push up property taxes, insurance, maintenance, repairs, and other housing costs, which gives $20,000 in savings less purchasing power than it had in 2005.
The FRED also tracks the Consumer Price Index for All Urban Consumers for new and used vehicles. The index was 95.5 in January 2005 compared to 124.7 today. That translates into a 30.6% rate of inflation over that stretch. Inflation rates were much higher for new vehicles since 2005, according to data from the FRED.
Furthermore, the Education Data Initiative’s research found that the average college tuition has more than doubled since 2005. Inflation has been higher for private universities than for public universities.
What Will Happen To Your Current Savings?
A $20,000 savings account in 2026 can’t buy as much as the same money in 2005. However, if the same rate of inflation holds, the $20,000 you have in the bank right now will only have $11,452.77 in purchasing power in 2047.
Investing in assets like stocks, real estate, and precious metals has been a long-term path to beating inflation and building a nest egg. While there is value in having an emergency fund that can cover six to 12 months of living expenses, the math shows that you will lose purchasing power over time if you keep every dollar in a low-yield bank account.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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