The Lifetime Savings Calculator: Which kopi will save you $10,000 at 35?

I love iced black coffee! (sans the sugar.)

Living a short walk from the local shopping mall and hawker centre, my mornings could involve a kopi o kosong peng or an iced americano. Sometimes I grind & press coffee beans at home, so… aiyoh, daily trilemma. But alas, variety is the spice of life.

Being a me, I had to list the options.

  • Kopi O Kosong Peng: $1.40
  • Kopi O Kosong Peng (Marked up): $3.00
  • Iced Americano: $5.00
  • Cold Brew: $5.80
  • Homemade: $2.00

Note on the Homemade: This will depend on your beans; I use 35g of beans a cup, so a 250g bag at $14 = seven cups at $1.96 each.

Look at the difference between an americano ($5) and kopi o kosong peng – you could be saving $3.60 a day!

What would this mean in a year? Or 5 years?

The answer is complicated – interest rates, inflation and options to invest need consideration.

Luckily for you,

Excel kung fu strong.

So before we get into the sheet [free download at the end of this post] let me unpack these basics:

Interest Rates

For money saved in the bank, interest rates determine how much your saved money grows over time, or the amount that banks pay you to keep your money in their account. They would then use your money to lend borrowers and charge them that interest.

Moneysmart’s already compiled a nice, updated list of Singapore interest rates to refer to, but for the sake of this post I’ll assume a value of 1%. This means my saved money today would grow by 1% per annum over the years.

Inflation Rates

Eroder of savings. Eater of worlds. Inflation is probably the number 1 reason to invest your money, and also why my iced kopi costs $1.40 instead of $0.90 like it used to back in school.

Inflation is the rate of increase of prices of stuff (goods and services la) over time. Inflation has many causes – higher costs of stuff-production, higher wages of stuff-makers (shame on your payraise), higher demand for stuff (e.g. when people in developing citiers can afford higher standards of living) and government policies are the usual suspects.

What’s Singapore’s inflation rate? Most sources use the Consumer Price Index (CPI), which tracks the change in price of commonly purchased goods and services, including housing and transportation.

For this post, however, I’ll be using the MAS Core Inflation, which excludes fluctuations in housing and transport. More info here!

Source: mti.gov.sg

To be a little conservation, let’s go with a fixed inflation rate of 2% per annum.

Investment

A popular topic – this could bloat up a post real quick. However, it’ll be good to illustrate just what can happen without investment, so I’m going to assume an investment growth rate of 0%. Keke.

Here we go.

Savings between Iced Americano ($5.00) to Kopi O Kosong peng ($1.40) = $3.60

Saving $3.60 a day means $1,310 a year! That may not look like much, and indeed $1,310 saved in the bank (earning interest) will only have the spending power of $1,221 in 7 years.

Summing up the accumulated years of savings, 7 years of disciplined cheap coffee drinking would result in an extra $10,124 in my bank account.

If I invested those savings, say, in CPF top-ups with a guaranteed rate of 4%…

$1,310 saved this year would no longer be worth less next year, but more. Specifically, the growth percentage would look like this:

Growth of Savings = Interest Rate – Inflation + Investment Growth

= 1% – 2% + 4%

= 2%

Measly. But much better than the -1% you would be “earning” if you let your money lose to inflation in the bank.

I hope you enjoyed this breakdown of savings – let me know if there’s any

-Improvements I can make

-Clear explanations you’d like for certain pointers

-Other stuff you think I missed out

I’d love to hear them! You can post in the comments if you like.

Download of the sheet used above:

Have fun!

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