Most of us don’t think twice about spending a few dollars each morning on a cup of coffee at our favorite local coffee shop. It’s part of the routine: the stop on the way to work, the afternoon pick-me-up or maybe just a comforting ritual that interrupts a busy or monotonous day. But what if, instead of buying that daily cup, you invested the same amount?
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Let’s run the numbers.
For our purposes, I’m drawing upon data from Toast that put the median price of a cup of coffee at $3.50 per cup (away from home), and yes, that is a product that has gotten more expensive due to tariffs.
Say you buy one cup of coffee every day of the year, for 365 cups at $3.50 per cup. That adds up to $1,277.50. Now, for the purpose of this thought experiment, our theoretical investor is 40 years old and invests in a portfolio that averages 8% annual returns.
So now, if our theoretical investor invested that $1,277.50 every year from age 40 until age 65, a good time to retire — 25 years — in a portfolio averaging 8% annual returns, how much would you have by retirement?
The answer: roughly $93,400.
Wow! That’s not pocket change. It’s enough to seriously boost your retirement cushion or offset unexpected healthcare expenses in your later years.
The Power of Compounding
Now if you tried to put that same amount away in even a high-yield savings account, you wouldn’t come nearly as close to that tidy sum. The reason the numbers grow so dramatically is due to the magic of compound interest. That means, each year, your investment earns returns not only on your original coffee-money contributions but also on the gains from previous years. Over time, that growth snowballs, turning small contributions into a surprisingly significant number.
If you started even earlier, say at age 30 instead of 40, the results become even more impressive. Using the same assumptions, investing that daily coffee money for 35 years would leave you with over $160,000 by retirement.
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A Small Change With Big Impact
This isn’t to say you should give up all of life’s small pleasures. For many, that daily coffee brings joy and focus (and, yes, you can save a lot of money by making your coffee at home). But exercises like this one highlight how consistent, automatic investing can transform small amounts into long-term wealth.
And, you don’t have to overhaul your expenses immediately or dramatically. Maybe you skip a few café visits a week and set up a recurring transfer of $10 or $15 into an investment account. The key is consistency, making small contributions regularly and letting time do the heavy lifting.
Retiring on a Coffee Future
The “coffee investment” experiment is a reminder that financial growth often comes from steady habits, not grand gestures. Whether it’s coffee, takeout or subscription services, directing even small discretionary expenses into an investment account can yield impressive results.
As personal finance experts often say, the best time to start investing was yesterday — the next best time is today. So, before you order your next latte, ask yourself how your daily $3.50 habit could steep into something much more satisfying later on.
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This article originally appeared on GOBankingRates.com: If You Invested the Cost of Every Cup of Coffee You Bought This Year, How Much Would You Have by Retirement?
