Tuesday, May 11, 2010

The Price of Caffeine (130 of 365)

If that $5 was, instead, invested in a fund that returned 8.8% (the annualized return of the S&P from 1871-2009), it would grow to $972,140.61 by the time that the 20-year-old turned 65. So, is the coffee really worth it?

I ask myself this question all the time when I'm in line waiting to order my venti triple-shot vanilla non-fat latte. When I think about it, I start to think that the free coffee at work might be alright. I just wish that I was 20 again. At 37, my $5/day will only add up to a little over $212k. The magic of compounding interest is that time is your best friend and most of us don't have as much time as we want by the time that we realize this fact. I don't know why they don't teach kids about this stuff in public schools (they didn't in mine).

BTW, if the 20-year-old could get Warren Buffett to invest his/her money (at his 23% annualized return), that $5/day would turn into a little under a 100 million dollars by age 65 ($99,130,678.97). That really makes the free coffee sound good.

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