Cut out the cost of cigarettes

Cutting out the small costs of cigarettes and not smoking can add up to large savings.

Cut out the cost of cigarettes

It is well known today the effects tobacco can have on our health. Since the mid-60s, there have been warning labels on cigarette packaging, yet we still have adults and teens choosing to take up smoking. In fact, in Michigan over 20 percent of the adult population (age 18 and older) are current cigarette smokers according to the Center for Disease Control and Prevention (as of 2012). Young adults in our state, ages 18-24, make up about 23 percent of that population. Why youth take up smoking may come from a myriad of reasons, yet the effects can not only be costly to their physical health, but also to their financial health.

The average cost of a pack of cigarettes in Michigan is $8. This ranks on the higher end throughout the United States, with the lowest cost being Virginia at $5.25 a pack and the highest in New York at $12.85 a pack. According to The Motley Fool, the yearly expense for an $8 pack – smoking an average of a pack a day – is about $3,000. That is a lot of money going up in smoke. Plus, that is not taking into consideration the loss of work time and productivity due to health issues caused by smoking.

Let’s say you kick that bad habit or don’t even start when you are young and instead save and invest that money. The money not spent on cigarettes on a daily basis could amount to a large payout in the future. For the purpose of this example, let’s say you live in Michigan and smoke a pack a day, remembering that is roughly $3,000 worth of cigarettes each year. Using the retirement calculator at Bankrate.com, we can see that if you invested that $3,000 each year for 20 years and earned the stock market’s average annual return of 10 percent, you’d have a nice little nest egg, or addition to your nest egg, of $165,602. That is for only 20 years and would be enough to provide more than $400 in monthly income for 30 years of retirement, accounting for inflation. As you can imagine, it would be worth even more in New York at $12 a pack!

What this means is if you or a young adult were to save the equivalent of the daily spending on tobacco for 20 years, they would have a substantial savings in the future. Youth under 18 and smoking could have over $160,000 by the time they are 40! Investing that money for another 20 years (to age 60), at just 7 percent interest would be an additional $1,600 a month for retirement. Four times the amount from above.

However, this isn’t just about the cost and health harm from tobacco. You may also look for other daily “indulgent” expenses to cut down on; for example, high end coffee, regular gambling, lotteries, cosmetics or regular entertainment events. The key is to see what you are spending money on on a regular basis and what that money is providing in return. Then, try to see if that can be reduced or eliminated. The money from that lifestyle change can go towards savings.

If youth can’t realize the health effects or think they can outlive the damage smoking does, then maybe they can see the monetary effect of smoking versus not smoking. Wouldn’t it be nice to have someone write you a check at the end of each year for $3,000? You can write that check to yourself by simply not smoking – plus live a healthier life, thus further saving you money.

For more information on fiscal management or youth money management, please visit Michigan State University Extension and the Michigan 4-H Youth Development websites.

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