Here’s how saving £5.40 a day could net me £1,971 yearly passive income for life

The price of a cup of coffee seems to have broken the £5 mark. Is it time to put that money towards building passive income instead?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Can you put a price on a cup of coffee? I mean, sure, you walk into a Starbucks and will be given a price. It’s a big outlay nowadays too. A cappuccino can set me back five pounds and change. But that price tag could turn into something very different if I invest it, where small sums can turn into big sums and handsome passive income, given enough time and know-how. 

My Foolish colleague Royston Wild showed as much in this article. He took a £5.40 saving and showed how it might reach £2.4m over a reasonable timeframe. And while I don’t have a daily coffee habit to slash out of my budget, it did get me wondering where else I might be able to carve out little pockets of savings. 

Give it up?

For my own situation, I’d like to think of the matter in the amount of passive income I receive. In particular, I’m interested in what it would take to start receiving the amount to buy a coffee every day. In short, how can I build a passive income stream of £5.40 a day from giving up the cups of coffee? 

Should you invest £1,000 in Aston Martin right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Aston Martin made the list?

See the 6 stocks

Let’s start at the end. If I target a 5% dividend yield from a smattering of high-quality income stocks, I’d need £39,420. That’s a lot of coffee or coffee equivalents. But by rerouting my Costa fund and putting it to good work in the stock market, I could get that back in just over a decade. Skip the coffee now, in 11 years (roughly) get £5.40 a day from investments. Not bad. 

My calculation is based on a 9% total return from whatever I invest in. Getting this key part of the equation right or wrong can result in my income being substantially higher, or lower.

Yellow stickers

One stock I hold and I’m bullish on beating that figure in coming years is Tesco (LSE: TSCO). The stock’s up 31% in the last year and pays a tasty 3.41% dividend. 

Created with Highcharts 11.4.3Tesco Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

It’s a defensive stock too. It could perform well even with a spot of economic malaise. Sales in food and essentials (including a certain caffeinated product) are the last things to stop getting bought. 

The company is a clear leader with nearly double the market share of its closest competitor. That offers efficiencies through economies of scale – a huge boon in a cut-throat sector. Its customers seem to agree too. At least Its Clubcard is incredibly popular with over 20m members coming back for yellow stickered discounts. 

On risks, a hefty employer’s NI bill has just been handed to it. A price-to-earnings ratio of less than 20 is hardly the cheapest either. Overall though, I see the stock as reasonable value. I think this is one for investors to consider in pursuit of a passive income. I reckon I’ll pop over there to pick up some instant coffee now too.

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in Aston Martin right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Aston Martin made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Fieldsend has positions in Tesco Plc. The Motley Fool UK has recommended Tesco Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

At a 52-week low but forecast to rise 73%! Is this growth share the FTSE’s top recovery play? 

This FTSE 100 growth share has taken an absolute beating over the past two years but Harvey Jones says the…

Read more »

Investing Articles

This FTSE 250 share offers a juicy 9.8% yield. Will it last?

This well-known FTSE 250 share has a percentage dividend yield approaching double digits. Should Christopher Ruane add the income share…

Read more »

Investing Articles

Is a £333,000 portfolio enough to retire and live off passive income?

A third of a million pounds can generate a serious amount of passive income, but relying on this sum alone…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing For Beginners

Why FTSE 100 investors should pay attention to ‘Liberation Day’

Jon Smith explains why the upcoming tariff announcement from across the pond could have an impact on the FTSE 100,…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

Here’s why Nvidia stock fell 13% in March

The Nvidia stock price rise was looking unstoppable. Should investors now be wondering if the same might be true of…

Read more »

US Stock

It’s ISA deadline week! Here’s my 3-step game plan

Jon Smith tries to calm the hype around the last minute ISA rush to buy stocks and explains why he's…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

£10,000 invested in BAE Systems shares at Christmas is now worth…

BAE Systems shares have been surging in the FTSE 100 in 2025, driven higher by the wavering US commitment to…

Read more »

Investing Articles

Up 19% in 2 weeks, can the Tesla share price rebound further?

Tesla's first-quarter delivery numbers came out today. Will they help persuade our writer to invest his money at the current…

Read more »