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A lot of us are of the mindset that we’re “no good” until we’ve had our first cup of coffee. We rely on java to power us through the day and to get our creative juices flowing. We even use it as the perfect excuse for a romantic encounter or to catch up with old friends. After all, if you offer coffee or tea at a party, 80% of your guests will accept. But our love of the cacao bean may be reaching new heights, and it may be costing us our future. A new survey conducted by Acorns, an investment app, has found that more than one-third of young Americans spent more money on coffee last year than they invested.
Approximately 54% of Americans over the age of 18 say they drink coffee every single day, and the average U.S. coffee drinker actually drinks just over three cups per day. Considering that one-fourth of coffee drinkers spends at least $11 a week on coffee alone, those purchases add up quickly — and we don’t really give spending money on our caffeine habit a second thought.
But, as Moneyish points out, maybe we should give it more consideration. If you spend $20 a week at Starbucks or Dunkin Donuts for your morning cuppa, you’ll end up shelling out $1,040 every year. Over a 40 year period, that comes out to approximately $41,600 for all those lattes, espressos, and iced coffees. Were you to invest that chunk of change every year instead, starting at age 25 and continuing until you turn 65 and retire, you could make around $170,000 (assuming a rate of return of 6%). Since around 56% of women between the ages of 18 and 34 aren’t currently saving for retirement, bypassing the coffee shop or drive-thru every morning could help you start your own 401k.
Even if you supplement by making your own brew at home, you’re probably spending more than you need to. Dana Sitar of The Penny Hoarder, who gave up coffee for a financial experiment, spent more than $500 a year on home-brewed coffee and a few cups from coffee chains here and there. Kicking her habit was tough, but both her physical and financial health are much better off for making the change.
As Wise Bread points out, giving up your $5 cups of gourmet coffee for 40 years could allow you to buy your own home. But if you can’t stand the thought of saying goodbye to your cafe au lait, try starting small. Giving up just one pricey cup of coffee per week in favor of investing in a low-cost index fund with 8% returns per year will yield around $280 a year, over $4,000 in a decade, and $72,743 and change in 40 years. Even if you cut out just one cuppa per month and choose to invest in the way we just outlined, you could make $64 a year, $938 in 10 years, and around $16,786 in 40 years! You probably won’t even notice that tiny sacrifice you’re making at the time, but you’ll definitely be thankful for that financial cushion when you finally retire.
It may be more instantly gratifying to place your order at the counter and take that first sip of sweetness, but will you really remember that cup of coffee in a month (or even in a week)? If you’ve been forgoing investments for the sake of your caffeine fix, you might want to crunch the numbers and consider switching to tea — at least every once in a while.