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For many people picking up a coffee on the way to work is as routine as brushing their teeth. But do you know what your coffee habit is really costing you?

Written and accurate as at: 9 Jul 2014

To many of us, a cup of coffee is a must start to the day (for some drip feeding coffee all day is a must). It’s both a stimulant and something we socialise over.

Whilst one cup of coffee may cost the equivalent of what we consider to be ‘small change’, the cost of our daily caffeine fix can certainly add up over time.

Let’s say you buy a large latte on your way to work each morning, at a cost of $4 per day or $20 per working week. Not much right? Over a month this coffee habit costs you $87 and over a year $1,040 and over five years this adds up to $5,200.

Let’s assume that instead of buying a coffee you decide to put $4 in a jar on your desk at work and every Friday you invest the $20 you’ve saved. Assuming a net investment return of 8%pa, in 12 months your savings will have grown to $1,082 and over 5 years you would have saved $6,388.

Over the longer-term, the benefits of compounding start to really take effect with your regular savings accumulating to $15,914 in 10 years, $51,310 in 20 years and a whopping $305,140 in 40 years! That’s a fair chunk of your potential retirement savings.

Don’t get us wrong, there’s nothing wrong with drinking coffee, we’re merely using coffee as an example of how regularly saving small amounts can add up to big amounts over time. If you do want to save money but don’t want to give up your coffee habit, you could always consider cutting down the daily coffee to just a few times a week, or ask your employer for a coffee machine in the office, or even get a coffee machine at home. These options are much friendlier on the wallet at 50 to 80 cents a cup.

You can use many examples of cutting out expenses to save money such as smoking, buying lunch every day or buying the weekly lotto ticket.

The key to saving is to know where your money is going each week and be more mindful about your spending habits. Keeping track of your expenditure and implementing a budget and savings plan are important steps to build wealth for the future.

Of course there are many people that can afford to, and absolutely love investing in a coffee on a daily basis.