Should your daily latte be the next sacrifice you make on the altar of sensible spending?
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"Eight years off your mortgage for the cost of your daily cup of coffee!" "Give up your daily latte and retire two years earlier!" Press releases with headlines like this arrive so often at The Fool, we could be forgiven for thinking all Fools' financial problems could be solved if we simply advised you to give up your daily cup of coffee.
Still, there's no doubt that, since the credit crunch began last year, everything from summer holidays to pension contributions has been squeezed as we all tighten our belts.
Should your daily latte be the next sacrifice you make on the altar of sensible spending? How much does your caffeine addiction actually cost you? What is the cheapest place to buy a latte? And is there anything you can do to cut your coffee costs - without having to give up your daily caffeine fix?
The "daily latte factor"
There's no disputing that it pays to beware your "daily latte factor". Popping into a coffee shop on the run each day can cost a small fortune over a year -- without you really noticing.
Here's how much a latte costs at seven popular coffee chains. (Apologies to espresso and cappuccino drinkers but I only had space to compare one type of coffee!)
Cafe | Beverage | Price | Size | Credit / Debit Card Payments | Cost over a year* |
|---|---|---|---|---|---|
Caffè Nero | Caffè Latte | £1.55 | 6oz approx. | No | £347.20 |
Pret A Manger | Regular `Just Roasted' Latte | £1.89 | 12oz | Yes | £423.36 |
Eat | Tall Latte | £1.90 | 12oz | No | £425.60 |
AMT | Latte | £2.00 | 11oz approx. | No | £448.00 |
Coffee Republic | Tall Caffe Latte | £2.05 | 12oz | Yes | £459.20 |
Costa Coffee | Caffe Latte Primo | £2.05 | 12oz | Yes | £459.20 |
Starbucks | Tall Latte | £2.05 | 12oz | Yes | £459.20 |
*Calculation based on 224 working days a year.
As you can see, of the seven cafes I surveyed, Caffè Nero offers the cheapest latte at just £1.55, compared to Starbucks, Costa Coffee and Coffee Republic, which all charge £2.05.
You might think a saving of 50p is too insignificant to make you want to switch chains -- but make that switch today and over the next year, you will save a massive £112.
However, it's worth noting that at Caffe Nero, you also get less latte for your money -- Caffè Nero's small size is just half that of the smallest cups from other outlets.
Elsewhere, drinks were of similar sizes -- and the price differences were fairly small. So if you like as much bang as you can get for your buck, you may find you get better value for money if you're prepared to pay more.
Overall, you should reckon on paying around £1.93 per drink (that's the average cost of lattes from these chains stores).
The price of drinking daily
As the table showed, drinking one latte every working day will leave you £347 to £460 worse off over 12 months. Yikes!
Just think: if you phased out your daily latte factor entirely, you could invest a sizeable sum into your pension, shares or a high interest savings account.
For example, if you put your coffee money into the market-leading Kaupthing Edge savings account every month instead of into the tills at Starbucks, you'd have £513 put by after a year-- and after two years, £1,020!
Similarly, if you had an offset mortgage, you could shave more than £11,000 off your mortgage payments over 25 years.**
But if the thought of cutting out your coffee intake altogether makes you feel a little faint, you could consider simply cutting back. By indulging on three days per week instead of five, latte-lovers could save £176. Alternatively, slurping on just two takeaway drinks per week would keep an extra £264 in your coffers.
But I'm sure you're sick to death of financial experts telling you how much you can save by giving up your daily treat.
There is a way you can continue to get your java fix - and still save yourself some cash. And that's to get a cashback credit card and buy your latte with it. By paying with a card such as the American Express Platinum MoneyBack Credit Card, you'll earn back up to 5% of what your coffee costa. Ka-ching!
However, paying with plastic does mean your choice of cafes will be more limited -- as you can see from the table, not all outlets accept credit and debit cards. Of the seven I surveyed, only Starbucks accepts American Express.
Alternatively, you can - of course - buy your very own coffee machine. I found two amazing bargains on coffee machines online at the moment:
- This Krups XP4000 Expert Pump espresso, cappuccino and latte maker used to retail at £149.99, but has been superseded by a new model -- so it's now available for £54.62 from Atlantic Electric And Gas.
- Alternatively, if you're after a machine that's fast and easy to use, this Nescafe Dolce Gusto coffee machine might fit the bill - it's £69.99 from Amazon.
So long, Starbucks?
** Calculations based on the typical Fool borrower, borrowing £150,000.
> Compare savings accounts and cashback credit cards at The Motley Fool.