📖 The story
Jake spends about $4.50 on coffee on the go each workday – roughly $90 a month. Instead of consuming it, he could invest that amount for 40 years at 8 %.
ℹ Ordinary payment, price increases not considered.
Topics › Saving & Compound Interest › The true price of the daily coffee-to-go
Easy
Saving & Compound Interest
The true price of the daily coffee-to-go
Change any number and press "Calculate" – or use "Type in" on the right to watch it entered step by step.
What you learn
"I can't save" is rarely true – the money just flows unnoticed into daily little things. Jake's $4.50 coffee a day is, over a working life, a small fortune he otherwise lacks.
In short: Small daily habits add up over decades into a surprising fortune.
Formula
FV = K0·q^n + R·(q^n − 1)/(q − 1), q = (1+i_eff)^(1/m)
With the example numbers
q = (1+0.0800)1/12 = 1.006434, n = 40·12 = 480
FV = 90.00 $·(qn−1)/(q−1) = 289,897.14 $
FV = 90.00 $·(qn−1)/(q−1) = 289,897.14 $
How to read the formula
Every installment earns interest until the end – early installments longer, late ones shorter. The bracket (qⁿ−1)/(q−1) sums up all these differently compounded contributions at once. q is the growth factor per period: from the effective rate p.a. the matching monthly factor is derived via the ¹ᐟᵐ root. Takeaway: it is not the sum of the deposits that counts, but how long each dollar is allowed to work.
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