Rapid City financial advisor Rick Kahler: Why coffee shops defy logic and why we keep them in business
If we all acted purely on logic, coffee shops would be out of business. Is that likely to happen any time soon? Don’t bet your latte on it.
Here’s why, using the numbers for my own favorite brew. A cappuccino with oat milk, it costs around $5.50 at a coffee shop. Multiplied by seven, that’s $38.50 a week. Since no one goes to a coffee shop every day of the year, let’s round that down to 44 weeks or 308 days. That’s still $1,694 a year spent on coffee.
Based purely on the numbers, it would make sense instead for someone to spend $1,060 on a Breville Barista Touch. It’s nice enough to make great cappuccinos but not so pricey that it feels like a midlife crisis. After that one-time cost, each cappuccino made at home would cost about $1.50. That covers the coffee beans, oat milk, and a little self-satisfaction. Over those same 308 days, you’d spend $462, which means you’d save $1,232 a year.
Over five years, you’re looking at $6,160 in savings—$5,100 if you subtract the cost of the coffee maker. That’s a nice chunk of change. If logic were in charge, every coffee lover would be saving cash by drinking at home. Here are some reasons why we don’t:
Status Quo Bias. Many people are regulars at the same coffee shop. The barista knows their name and starts their order when they walk in the door. Even knowing the financial benefits, it wouldn’t be easy to change that comfortable routine.
Instant Gratification (I Want My Coffee Now). Making a cappuccino at home takes effort. Grinding the beans, steaming the milk, and cleaning up afterward is a whole process. Going to the coffee shop feels easier and faster—even if the process of going to the cafe, waiting in line, and waiting for your order might actually take longer.
Emotional Attachment. A daily visit to a coffee shop is not just about the coffee (roasted beans are shown above in a public domain image posted on wikimedia commons). It’s a ritual, a moment of indulgence that feels like a treat. It’s acting on what I call the “I deserve this” money script, which is deeply tied to how we emotionally justify spending. No amount of financial logic can compete with the warm feeling of treating yourself.
Loss Aversion. Even though the math shows a $1,060 coffee maker would pay for itself in less than a year, shelling out that much all at once feels like a punch in the gut. We feel the pain of a big purchase more than the pleasure of long-term savings. Not to mention that nearly half of Americans would have to borrow or sell something to come up with $1,000. Continuing to pay $5.50 today, while leaving the issue of future savings for another day, feels like the easier choice.
If our coffee buying choices were about logic, there would be many more espresso machines in our kitchens and many fewer coffee shops in our neighborhoods. But 90% of financial decisions are not about logic. They are about the comfort of our routines, the instant gratification, and the emotional pull of a regular small indulgence. There are plenty of reasons that coffee shops remain in business. Despite the math that shows the obvious financial benefits of making your own cappuccino at home, we’re just not wired to always make the logical choice.
That’s why, regardless of the numbers, so many coffee drinkers will still be at their favorite café tomorrow. I might even be among them. Because, while I have a Breville Barista Touch at home and use it regularly, I also go to a coffee shop a couple of times a week.
Rick Kahler, CFP, is a fee-only financial planner and financial therapist with a nationwide practice, Kahler Financial Group, based in Rapid City. His co-authored books include Coupleship Inc. and The Financial Wisdom of Ebenezer Scrooge.
