When you haven’t got much capital of your own, the road to financial security can seem long, hard and complex, but the truth is that wealth building is relatively simple. All it takes is time and the price of a cup of coffee.

This blog by Dimensional Fund Advisors’ Jim Parker, is a great illustration of how much can be achieved with a little effort early on, combined with some willpower and patience.

The son of a friend just graduated from university. Still in his early 20s and with student loans to pay off, James has hardly any savings or capacity to save much at all.

So James and I met for coffee and a chat. He had acquired a taste for espresso while studying and working at night waiting tables (the coffee kept him awake).

“How much do you spend on espresso each week?” I asked him. After thinking for a moment, he replied that he averaged about two cups a day, each costing £2.50. That equated to about £30 a week or £120 a month.

“Well, what if you sacrificed the coffee and put the cash into a savings scheme instead?” I suggested.

James looked doubtful. Kicking caffeine wouldn’t be easy. Besides, he couldn’t imagine that loose change spent on coffee would make much difference to his long-term financial position.

I dealt with the  problem by suggesting he make a coffee budget – the thought of making instant coffee at home and bringing it into work each day in a flask didn’t appeal. The coffee budget would give him £30 worth of caffeine each month. An immediate saving of £90.

Here’s the thing though. By limiting his coffee expenditure to just £30 it dropped to almost zero overnight. With a limit of only 12 espressos a month he had to be sure he really, really (and I mean REALLY) wanted one.  The result was more often than not he decided he’d wait and “save” the espresso until later in the month (when he REALLY needed it). Now each espresso really had to count. Pretty soon he’d cut back his coffee expenditure to about £10 per month.

The benefit? An extra £110 a month in his wallet.

With an initial balance of £357, a monthly contribution of £110 and a yield of 5%, his coffee money would gradually accumulate to a pool of a quarter of a million pounds in a little under 47 years – and just before his state pension age. And this was without increasing his expenditure by a single penny.

Assuming James’ salary was to rise on his graduation, he might bump up that monthly contribution to £500. In this case, his savings pool would grow to well over a million pounds by the time the state starts to pay him a pension.

This sounds too easy, he said. That’s because it is easy, I replied. The interest he earned on his saving was paid into his account and included in the next calculation. So he was earning interest on interest.

The key was that firstly he was starting early. Secondly, he was saving a small amount consistently month after month. Thirdly, he was exercising patience. The rest of it was just the effect of time and compounding.

(Obviously, this young man’s earnings will be subject to tax, but the purpose of this exercise was to show him that a small sacrifice, made regularly, would yield significant results over time.)

James now refers to his savings plan as his ‘espresso portfolio’. The initial pain of kicking his expensive caffeine habit was made up for by the slow roast of a savings scheme that promised him a comfortable retirement.

Even for those of us much older than James, there are lessons here. We tend to underestimate the effect of gradual saving and patience in building wealth, just as we tend to over-rate gimmicks promoted in the media.

We can’t control the ups and downs of markets or the daily noise of the media. We can control our own behaviour. With slow and steady saving, and a trusted advisor to keep us disciplined, there is no reason we can’t succeed.

Now enough of this talk about money. How about a coffee? Put the kettle on then…