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Gen Z ditching their overpriced Starbucks could make them a millionaire, says finance guru Suze Orman
Personal finance expert Suze Orman has revealed how ditching your overpriced coffee habit could save you a fortune in retirement.
The financial advisor and former CNBC host said Gen Z Americans could amass a staggering $1 million in savings for later life simply by foregoing their daily $6 Starbucks.
Speaking to MSNBC host Mika Brzezinski, Orman emphasized the power of small investments over daily discretionary spending.
If a 25-year-old puts a small amount away each month in a retirement account, compound interest will cause this to snowball over the course of 40 years, she explained.
'All of you are paying $1 million down the drain. I've never bought a Starbucks in my life,' she said.
Personal finance expert Suze Orman has revealed how ditching your overpriced coffee habit could save you a fortune in retirement
Foregoing a $6 coffee and putting it in a retirement account with a 10 percent rate of return could grow to over $1 million over the course of 40 years
In the interview in March, Orman recounted what she had said to Oprah on her show when she had asked what people were wasting their money on.
She told Brzezinski: 'I said, Oprah, do you know if you were 25 years of age and you bought a Starbucks every single day and rather than doing that, you put $100 a month into a Roth IRA, a retirement account, and you did that every single day until you were 65.
'You averaged 12 percent on your money over all those years. Do you know how at the age of 65, you'd have $1 million? So all of you are paying $1 million down the drain?'
DailyMail.com analysis shows that foregoing a $6 coffee would save $180 a month.
By putting those savings into a retirement account with a 10 percent average rate of return instead, the funds would grow to $14,070.91 over five years and to $130,497.61 over 20 years.
With the help of compound interest, this pot would balloon to a huge $1,007,209.33 over the course of 40 years.
Investment advisor Patrick Donnelly previously told DailyMail.com how resisting the temptation to buy a cold brew or latte, and making it at home instead, could mean you have more to fall back on in later years.
Donnelly, of Donnelly financial services, said: 'That is real money that can drastically change your timeline toward retirement, and it can drastically change your retirement stability.'
Suze Orman said she had never bought Starbucks in her life
Putting $180 a month into a retirement account with a 10 percent rate of return - instead of spending it on coffee - could save over $1 million in 40 years, analysis reveals
The retirement balance will grow considerably due to compound interest (Pictured: NerdWallet calculations)
Financial planner Patrick Donnelly said forgoing your daily coffee could save you a fortune in retirement
'We live in a world which is immediate gratification-oriented, and I think that is one of the biggest hurdles to overcome,' he added.
'We can easily slip into these negative spending habits.
'As income comes in we have a choice. We can spend that on today's expenses - some of which are necessary and some of which are unnecessary - or we can invest for our future self.'
The key, he said, is to consider your 'guilty-pleasure' spending habits and pick one thing that you could live without which is detrimental to your long-term savings.
It comes as alarming figures show millions of Americans have nothing saved for retirement.
Across all ages, 28 percent of people have no money at all saved for their later years, while 39 percent are not contributing to a retirement fund, a GoBankingRates study found earlier this year.
Even among 55 to 65-year-olds, who are close to retirement, a quarter have nothing put away, it found.
The survey also exposed a wide disconnect between what people think they will need for retirement and the value of their savings pots.
A quarter of those questioned said they expected to be able to retire with less than $500,000 while 30 percent estimated they would need a seven-figure pot.