PPP vs FX
PPP vs FX What’s the Difference
PPP vs FX: FX shows how much currency you get today, while PPP shows how far money may go on average locally. Both matter when comparing salary buying power across countries.
Published: January 1, 2026 · Updated: January 1, 2026 · By FinToolSuite Editorial
Disclaimer
- Educational purposes only, not financial, tax, legal, or relocation advice.
- Examples are illustrative and simplified.
- Results depend on your inputs, PPP ratios, and FX snapshots and are not guaranteed.
Quick answers
- FX tells you how much currency you get today.
- PPP tells you how far money may go on average locally.
- PPP is not city specific and not spendable.
- Use scenarios to compare like for like.
PPP vs FX: the core difference in one minute
What FX answers
FX swaps £1 to roughly $1.25 (illustrative) at today’s rate. It is your nominal, spendable amount after conversion.
What PPP answers
PPP ratio explained: if PPP is 0.8, it hints prices are lower than the reference, so the same income could buy more locally on average.
PPP vs FX comparison table
| Question | Use FX | Use PPP |
|---|---|---|
| Convert pay to another currency | Yes—FX snapshot salary conversion shows today’s amount. | No—PPP is not spendable. |
| Compare buying power across countries | Partially—it shows nominal size only. | Yes—PPP adjusted salary shows directional buying power. |
| Understand sensitivity to rate changes | Yes—rerun when FX moves. | Less frequent—PPP updates periodically. |
| Sanity check lifestyle power on average | No—FX alone misses price levels. | Yes—PPP highlights average price differences. |
For FX timing tips, see the FX snapshot page.
Common misunderstandings
- Treating PPP like a spendable exchange rate.
- Thinking FX implies the same lifestyle everywhere.
- Ignoring FX timing and snapshot effects.
- Assuming PPP matches a specific city.
- Assuming PPP covers housing or schooling perfectly.
- Comparing runs with different settings or dates.
- Over trusting a single number—rerun when inputs change.
- Forgetting taxes and pension deductions—use the tool’s toggles first.
One worked example
| Input | Value (illustrative) |
|---|---|
| Origin salary | $70,000 |
| FX rate | 1 USD = 0.9 EUR (snapshot) |
| PPP ratio | 1.1 (destination pricier) |
| Output | Value | What it means |
|---|---|---|
| FX converted | €63,000 | Nominal amount after conversion. |
| PPP adjusted | €57,000 | Buying power estimate given higher local prices. |
Illustrative only. Rerun with your inputs.
How to use both on FinToolSuite
- Use the PPP tool to compare lifestyle power: PPP Adjusted Salary Power.
- Check FX snapshot and rerun if rates change: see FX snapshot in PPP comparisons.
- Save two scenarios and compare to see PPP adjusted salary and FX side by side.
FAQs
Is PPP the same as FX?
No. FX converts currency; PPP compares price levels.
Can I spend PPP rates?
No. PPP is not spendable; it is a comparison metric.
Why does FX change more often than PPP?
FX moves with markets daily; PPP updates periodically.
Does PPP include housing?
Housing is in the basket on average, but your costs can differ.
Why do results change day to day?
FX snapshots shift; rerun scenarios when rates move.
Is this advice?
No. It is educational, not financial, tax, legal, or relocation advice.
How does this relate to tax?
Estimate net pay first, then use PPP and FX to see buying power.
Where can I see examples?
See the PPP adjusted salary examples.
Does PPP include taxes?
No. Use a tax estimate first, then apply PPP for buying power context.
Is PPP city specific?
No. It is a national average; city costs vary.
Privacy and safe handling
- Use generic scenario names.
- Avoid entering personal identifiers.
- Treat exports as sensitive.
- See the Privacy Policy for data handling.