One of the best personal finance books I’ve ever read, Smart Couples Finish Rich by David Bach, talks about the latte effect. Briefly, it’s how much money you could save, or earn, by not treating yourself to a cup of coffee every day. Here, we’re talking about high-end coffee drinks sold at Starbucks and other coffee establishments. So I decided to do the math.

Basic assumptions were: $3.50 a day, five days a week, for 50 weeks. I did 50 instead of 52 weeks, to account for holidays. That comes out to $875 for the year spent on coffee drinks alone! The second assumption was that I invested that money in a mutual fund that earned on average 10% per year. The third assumption is that I added that $875 worth of coffee that I did not drink to the fund, every year. And finally, that the price of a latte did not go up over the next thirty years. That keeps it simple to figure out.

The results: at the end of 30 years, all those cups of coffee ended up costing almost $144K. At the end of 35 years, you could have saved $237K, and at the end of 40 years (imagine starting this in your early 20s), a whopping $387K. This may not seem like a lot, but when added to your savings plan (your retirement accounts, etc. You do have a savings plan, right?) it is a substantial amount of money. The results are shown in the table below.

Do yourself a favor right now: Buy yourself a coffee maker for your home, and start putting that money otherwise spent on a fancy latte into a fund and watch yourself grow richer faster.