The Money Shelf Journal · Essay

The Humble Cup

A history of coffee and tea, and what a five-dollar cup says about saving, spending and the good life

By Kenneth McDonald

Coffee, tea and cake on one table.

A cup of coffee has been accused of being the reason a person is not rich. The charge is short and the sum is correct: a purchase of 5 every day, in dollars, pounds or Australian dollars, costs 1,825 over a year. David Bach, the author of The Automatic Millionaire, gave the charge its best-known name, the Latte Factor, and the Consumer News and Business Channel (CNBC) reported on 19 October 2018 that Bach holds that small regular purchases, such as a $5 daily latte, add up to a large sum and are better redirected into savings, where compound interest can work on them.

The cup has a defence, and it begins a long way from any café counter. It starts with wild plants on a plateau in Ethiopia and a leaf from the hills of Yunnan, and it runs through a Sufi community in Yemen, a Venetian import of 1580, an Oxford coffeehouse and a Dutch botanical garden. This essay follows that defence from the beginning, tests the accusation against official records, and then sits two sensible people at one table, one who wants to save the 1,825 and one who wants to spend it on the pleasure of a cup, because each of them is right about something.

The accusation, tested

The book The Money Shelf put this claim, along with 21 others, against the official household spending records of the United States, the United Kingdom and Australia. The arithmetic of the claim holds, and the records show that the cup is a small part of a household budget.

In the United States, the Bureau of Labor Statistics Consumer Expenditure Survey for 2024, released on 19 December 2025, puts average spending at $78,535 per consumer unit, and a daily 5 is 2.3 per cent of that. Housing and transport together take 50.4 per cent. In the United Kingdom, the Office for National Statistics figures for the financial year ending 2025, released on 11 June 2026, show the same daily 5 as 5.2 per cent of average spending, while housing and transport take 31.7 per cent. In Australia, the Australian Bureau of Statistics Household Expenditure Survey for 2015–16, the latest survey of household spending, puts the daily 5 at 2.5 per cent, against 34.1 per cent for housing and transport.

The book gave the claim the verdict weak diagnosis, which means that the arithmetic is true and explains less than the claim says it does. The sum is right, and the larger sums are somewhere else. The writer Donella Meadows, reviewing Your Money or Your Life by Vicki Robin and Joe Dominguez in 1993, described readers who track every penny to find the things they buy and never use, which the book calls its "gazingus pins". A cup of coffee has the advantage over a gazingus pin that it is finished within about twenty minutes and nobody has to find a drawer for it.

A bean from the highlands

Wild coffee plants are thought to have grown on a plateau in Ethiopia called Kaffa, and the origin and early domestication of the plant are unclear. The famous story of the goatherd Kaldi, who is said to have noticed his goats growing lively after eating the red berries around the year 850, is a legend. The earliest written account of it dates from 1671, some eight centuries after the date it describes, and the name Kaldi appears to be an invention of the twentieth century.

The documented story begins later. There is no confirmed evidence of coffee being drunk as a beverage before the fifteenth century, and by the late fifteenth century it was well established in the Sufi communities of Yemen, where tradition holds that it helped worshippers stay awake for prayers at night. Yemen supplied nearly all of the world's coffee until the late 1600s, and the port of Mocha, on the Yemeni coast, was Europe's main source of the bean until the end of that century. The name of the port is still on café menus today.

Coffee was argued over almost from the start. In 1511 a court in Mecca forbade it, and the ban was overturned in 1524, which is a longer record of enforcement than most diets achieve. Some Islamic authorities had judged the drink intoxicating, and many Muslims drank it anyway as an alternative to alcohol.

The house where the news was sold

The coffeehouse is the part of the story that leads most directly to the modern café. According to the Ottoman chronicler Peçevi, two Arab merchants opened the first coffeehouse in Istanbul, in the Tahtakale district, in 1554 (another source gives 1555). Political and religious leaders banned coffeehouses on several occasions afterwards, and the bans were hard to enforce.

The drink then moved west. Prospero Alpini imported coffee into the Republic of Venice from Egypt in 1580, and the first coffeehouse on the European mainland opened in Venice in 1645. A Dutch merchant, Pieter van den Broecke, brought coffee bushes from Mocha to the botanical garden in Amsterdam in 1616. In England the first coffeehouse opened in Oxford in 1650, and in 1652 Pasqua Rosée opened one in London. At their peak in the eighteenth century London had about 550 coffeehouses, and the early ones were nicknamed "penny universities". One of them, Lloyd's Coffee House, was the place where the underwriters who insured ships met, and from it grew Lloyd's of London.

For anyone who believes that a coffee is only an expense, that last fact deserves a pause, because one of the world's great insurance markets grew out of a room where people bought a drink and stayed to talk about ships.

A leaf from Yunnan

Tea has a longer written history and a shorter list of legends that can be trusted. In Chinese tradition the emperor Shennong tasted the first tea around 2737 BCE (before the Common Era), when a leaf blew into his boiling water, and this is a legend. The historical record is that tea was probably first used in Yunnan as a medicine in the second millennium BCE, and that the earliest physical evidence of tea drinking, found in 2016 in the tomb of Emperor Jing of Han near Xi'an, dates from the second century BCE. The earliest credible written record of tea drinking is in the medical text of Hua Tuo, from about 220 CE (Common Era). By the middle of the eighth century tea drinking was widespread in China and had spread to Korea, Japan and Vietnam.

Japan's tea history has precise dates. The monks Saichō and Kūkai brought the first tea seeds to Japan in 805 and 806, the priest Eisai introduced tea seeds to Kyoto in 1191, and in 1211 he wrote Kissa Yōjōki, the oldest tea book in Japan. In 1738 Soen Nagatani developed sencha, the green tea that is now the everyday cup in Japan, and in 1835 Kahei Yamamoto developed gyokuro, a finer one.

Europe came to tea through ports. Portuguese ships first reached China in 1516, Portugal had a trading port at Macau by 1557, and in 1560 Gaspar da Cruz published the first Portuguese account of Chinese tea. In the early seventeenth century a ship of the Dutch East India Company brought the first green tea to Amsterdam. The same company was bringing coffee bushes to the same city in the same century, which is the kind of diversification that a money book would recommend. In England, the marriage of Charles II to Catherine of Braganza in 1662 brought tea drinking to the court, and in 1664 the official British tea trade began with a small shipment for the king.

Tea also became tied to a war. Opium imports into China rose fivefold between 1821 and 1837, and the opium trade was part of what funded British tea imports. When the Qing court moved to curb the trade in 1838 and 1839, the threat to that funding was a main cause of the First Opium War. A cup of tea in a British drawing room was connected to a war in China through a chain of payments: opium sold in China brought in the money, the money bought tea, and the tea was shipped to Britain.

The long road to the cup

For coffee, the Dutch East India Company could supply Europe with "Java coffee" by 1719. Gabriel de Clieu brought coffee seedlings to Martinique in 1720. In 1727 Francisco de Melo Palheta obtained seeds in French Guiana, which began Brazil's coffee industry, and by 1788 the French colony of Saint-Domingue supplied half of the world's coffee. Brazil became the world's largest producer in 1852, and its coffee plantations relied heavily on enslaved African labour until Brazil abolished slavery in 1888.

For tea, the British carried production to India and Ceylon, now Sri Lanka. Tea plants were reported growing in the hills between Burma and Assam in 1824, tea cultivation was introduced into India in 1836 by the British, and into Ceylon in 1867. The British set up Assam's tea plantations in the middle of the nineteenth century, and about 800 estates operate in Assam now.

The scale of the cup today

The United States Department of Agriculture's coffee circular of July 2026 forecasts world coffee production in 2026/27 at a record 189.7 million 60-kilogram bags and world consumption at a record 179.7 million bags. Brazil leads production at 71.9 million bags, followed by Vietnam at 32.5 million, Colombia at 13.4 million and Ethiopia at 12.1 million. Ethiopia, where the plant is thought to have grown wild, is the fourth-largest producer in that forecast.

For tea, Statista's summary page records that China produced around four million tonnes in 2024, and Wikipedia's history of tea lists Sri Lanka as the fourth-largest producer after China, India and Kenya, with about 187,309 hectares under tea. A table published in May 2026 by the tea brokers Forbes & Walker, drawing on the Tea Exporters' Association of Sri Lanka, lists the heaviest tea-drinking countries per person as Turkey at 3.16 kilograms a year, Ireland at 2.19 and the United Kingdom at 1.94 (the table does not state its reference year).

What fairness costs

By the end of the twentieth century a further question was being asked about both drinks, which was who is paid what for growing them. The Max Havelaar foundation launched the first Fairtrade label in the Netherlands on 15 November 1988, and the first fairly traded coffee came from UCIRI, the Union of Indigenous Communities of the Isthmus Region, a cooperative of farmers. Under Fairtrade, a buyer pays at least an agreed minimum price and adds a premium on top.

The figures keep changing. On 30 July 2026 Fairtrade International announced new minimum prices that take effect on 1 December 2026: US$2.00 a pound for washed arabica, up 20 cents (11 per cent) from US$1.80, and US$1.30 a pound for natural robusta, up 10 cents. The Fairtrade Premium stays at 20 cents a pound and the organic differential at 40 cents a pound. Fairtrade International reported that cooperatives earned more than €57 million in Fairtrade Premium in 2024, and that the new prices rest on cost-of-production data from 57 cooperatives in 13 countries and feedback from more than 600 people in a consultation.

For tea, Fairtrade International states that about 800 estates operate in Assam and that roughly 1 per cent of them hold Fairtrade certification, and that certified estates in India sell around 10 per cent of their tea on Fairtrade terms. Estate workers are employed and paid low cash wages.

Two sensible people at one table

The Latte Factor and its answer in the spending records look like a disagreement, and they can be set side by side as two ways of reasoning that each begin from something true.

The first begins with the sum. The 1,825 a year is 152.08 a month, and The Money Shelf shows how a monthly sum behaves when it is left alone for decades. Calculated for this essay with the book's own method, at a net return of 7 per cent a year with no rise in the sum and no allowance for inflation, 152.08 a month grows to about 399,190 over 40 years and about 185,537 over 30 years. At 4 per cent the 40-year figure is about 179,757. These are illustrations of how arithmetic works and are not forecasts. A person who reasons this way is right that a small sum saved for a long time is not small, and that the first ten years do a disproportionate share of the work, which is the finding of Claim 1 in the book.

The second begins with the cup. A person who stops at a café for ten minutes, or sits down to a pot of tea in the afternoon, is keeping a ritual with a long history: tea has been drunk in Japan since the first seeds arrived in 805, and London coffeehouses have been open since 1652. The case made for this way of living is that a day with some enjoyment in it is a day in which a person feels better and works better, and that this in turn helps a family. That is an argument about wellbeing, and the official records the book uses do not measure it, so the book does not rule on it. The book says that the cup is a small share of the budget, and that the larger sums are in housing and transport. The publishers' descriptions of I Will Teach You to Be Rich by Ramit Sethi and Pound Foolish by Helaine Olen make a related point, that a person can keep the latte and still automate the saving, and that cutting small expenses will not offset the largest ones.

Kenneth McDonald, who wrote The Money Shelf, sits at the second table as readily as the first. He goes out for a coffee, a tea, a cake or a meal on a very regular basis and says so without apology, and he also checked 22 claims in the book against the records of three countries, which is a habit of the first table. The two ways of reasoning answer different questions: one asks what a sum becomes, and the other asks what a day is for. A person can hold both questions and answer them differently in different seasons of life.

The cup, the cake and the sum

Two prices rise on 1 December 2026: the Fairtrade minimum for washed arabica, and the ebook of The Money Shelf. The two increases were set independently, and the coincidence is offered for the entertainment of anyone who enjoys a coincidence with their coffee.

The sum is 1,825 a year, and the records say it is the smaller part of the budget. What the cup is worth beyond the sum has been argued in coffeehouses since the sixteenth century, and the argument has never needed an official record to carry on.