Whether it be for a meeting at work or catching up with friends or family, I have often wondered how there are soooo many coffee shops thriving in a market place where there seems to be an oversupply with no real pricing wars.
There has to be more to it than just a nation obsessed with coffee. I decided to go deeper and take a look at the numbers to see how much our coffee addiction is really costing us.
Coffee is the second-most traded commodity in the whole world. Australians now pay over $3 billion a year just to get their daily hit of caffeine. On their pursuit of the perfect coffee, 86% of coffee aficionados (self-proclaimed “coffee snobs”) claim to have an emotional relationship with their coffee. There are even 1.1 million Australians that said they would rather give up their mobile phone for a day instead of missing their morning coffee. The average Australian downs 14 coffees every week which includes on average ordering a medium takeaway coffee each day (the average cost of a medium coffee in Australia is around $4). Have I mentioned Soy milk/Almond milk for $0.50 more and card charges for purchases under $10!
Let’s Run The Numbers
From the statistics, the average Australian is spending the following on takeaway coffees:
PER DAY: $4
PER WEEK: $4*7 days = $28
PER YEAR: $28*52 weeks = $1,456
Let’s just think about that for the moment. On average, each Australian is almost spending a fortnights pay (average income after tax) on their caffeine addiction.
For many of us, we are more than happy to fork out the $$$ to get that nice warm cup of coffee before work.
The actual cost of the coffee however is not the TRUE cost of the addiction – The true cost comes from the opportunity cost of not buying $4 cups of coffee but rather investing the money saved.
Let me introduce to you “THE LATTE FACTOR”
The Latte Factor
If you decided not to buy a $4 takeaway coffee each day, but rather invested it at 10% compounded (interest calculated and added monthly) – How much money would you save up?
Through the power of compounding (BLOG POST: The Eighth Wonder Of The World: Compound Interest), the $58,400 that would have been spent over a normal working life on coffee (40 years), would net you an extra $769,644 for retirement!!!
Australia’s coffee culture is not going anywhere. Prices will continue to be overinflated in a crazed Australian market. As you can see however, if you can control your intake, the amount of savings that could be amassed by investing the saved money should be enough to even question the biggest coffee drinkers in Australia.