This is a buzz kill.
More than one in three Americans spent more on coffee last year than they invested, according to a survey of 3,000 adults ages 18-44 by money app Acorns — likely because about one in four of us has an $11 or higher per week coffee habit. What’s more, 44 percent say they spent more on holiday gifts than they invested and 37 percent spend more on vacations.
It’s not that people don’t know they should invest, it’s that they often don’t think of it in the moment of spending, says Noah Kerner, CEO of Acorns. “In our culture we are pretty addicted to spending,” he says. We buy that cup of coffee almost automatically — and certainly without thinking about what that $4 could mean if we invested it, he explains.
The problem is, it could mean a lot — thanks to the magic of compound interest. Here’s a simplified example to show you how that works: Let’s say you’re spending $20 per week on coffee, which would add up to $1040 per year. If instead of buying cups of joe, you invested that $1040 each year from when you were 25 until retirement at 65, you’d end up with more than $170,000, assuming a 6 percent rate of return. If instead, you spent $1040 on coffee each year for the next 40 years, you’ll have spent $41,600 on coffee — with nothing to show for it except a bit of a buzz each morning.
Of course, while we know we “should” invest, many of us still have no idea how much to sock away…Read More