What is a cup of coffee worth to you? For many, coffee is a huge part of their morning routine. But could that grande latte from Starbucks cost you your retirement fund?

Many of the people I meet with, especially young people who’ve recently entered the workforce, understand the importance of saving for retirement. However, they often believe that they don’t have the means to start funding their nest egg. They are full of good intentions but are bogged down by the familiar excuse of “someday I will start saving.” It’s funny how “soon” and “someday” often seems to get delayed to tomorrow, or next month, or next year. The key to establishing any savings program is to just start.

The average Starbucks trip in New York costs $3.15. Over time, that money adds up. What might surprise you is how much and, indeed, how fast. Thanks to the effects of compounding, that morning pit stop might be worth over $140,000 over the course of your lifetime. While a few bucks may seem inconsequential today, let’s take a look at the math and uncover the real potential impact.

To understand how compounding interest works, imagine if every day you put a jelly bean in a jar. At the end of the year you’d have 365 jelly beans in the jar. Now imagine if, at the end of every day, someone else added a percentage of your total jelly bean count to that same jar. Because we like big, round numbers, let’s say they add ten percent of your total. After day one, you’d have 1.1 jelly beans – that’s your original plus the ten percent from someone else. After two days you would have 2.31, and so on and so forth. At the end of the year you would end up with a total of 383.92 jelly beans instead of 365. Maybe this seems like peanuts – or jelly beans – but, over the course of a lifetime, saving regularly and the power of compounding can help you reach your life goals, for things such as a down payment on a new home, a fund for your children’s education, or maybe a more comfortable retirement.

Now, let’s get back to the morning coffee routine. With an average price of $3.15, a daily coffee budget adds up to $1,146.60 per year. Suppose we cut back on one coffee per day and saved the $1,146.60 each year.  Assuming a hypothetical annual 8% rate of return, investing $1,146.60 annually for just 30 years, reinvesting dividends and earnings, the result may be $140,281.77. Think about it. This might make that daily cup of coffee start to look very expensive.  On the other hand, $140,000 could have an important impact on your life. It could open new possibilities for you and your future. And it could be the start of new savings habit that could really change your life.

Don’t worry, I’m not asking you to give up coffee. I just want to open your eyes to how a simple but consistent investment can add up over time. The key is taking the first step. I recently spoke at a conference on just that; the importance of just starting. While we all agree it is important to save, we have to take the first step of finding where that savings comes from. If it costs you a few lattes or maybe you pack your own lunch instead of eating out a few days each week, it might be a small price to pay as you invest in your future and build a solid foundation of financial peace of mind.  Think about it. Then start saving for your future. Start today!

If you want to gauge your retirement readiness, take my free assessment to see how you stack up.



Investing involves risk and clients should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. The information contained herein is intended for information only, is not a recommendation to buy or sell any securities, and should not be considered investment advice.  Please contact your financial adviser with questions about your specific needs and circumstances.

Equity investing involves market risk, including possible loss of principal. The earnings are compounded and reinvested and do not take into consideration any tax implications and their effect on the investment. They are not representative of past or future performance but are provided for illustrative purposes only. Actual results will vary. This type of plan does not ensure a profit or protect against loss in declining markets.

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