Delayed Gratification and Money (or, Marshmallows and Your Financial Health)

Between 1968 and 1974, researcher Walter Mischel conducted what would later become known as the famous Stanford marshmallow test. Mischel studied children between the ages of four and five. He left each child in a room with a marshmallow, telling them that he would return in 15-20 minutes; he explained that if they hadn’t eaten the marshmallow by the time he returned, he would reward them. Fourteen years later, Mischel followed up on the children: those who had not eaten the marshmallow were more self-motivated, educationally successful, and emotionally intelligent. This study proved that the ability to wait for delayed gratification has as positive impact on where you end up in life.

What can we learn from Mischel’s study?

1. Avoid Temptation.

Mischel found that when the marshmallow was out of sight, it was easier for the child to wait the duration of 15-20 minutes. Take this to heart: if you have things in your life that are calling to you to buy them, remove them from your surroundings. This might mean unsubscribing from eBay, or changing your walk to work so you don’t always pass the magazine shop.

Distracting yourself from a purchase that you are considering is always a good idea. What might seem like an important purchase to you now could end up being useless to you in the future. There is a saying in marketing: “a purchase delayed is a purchase not made.” Take this wisdom to heart and delay your purchases. This way you can decide if these items are truly what you want.

2. Make a Plan.

With some children, Mischel discussed tactics on how to not eat the marshmallow. These children fared better in the test: they were more apt to wait until the researcher retuned without eating the marshmallow.

This demonstrates that if you want to watch what you spend, you need to have a plan. Make a budget, so that you are aware of your expenses. Use your friends and family as a support network to help you achieve your financial goals. Sometimes just talking over your plans with a friend (or even your banker, credit counsellor, or investor) clarifies the plans for you so that it is even easier for you to stay on the path you want.

3. Investments Multiply.

Mischel varied the rewards that he gave the children who waited the 15-20 minutes. Sometimes the reward would be a second marshmallow.

Although Mischel’s experiment is a controlled situation, it mirrors real life. Investing your money will lead to returns of more money. Can you give up eating that one marshmallow now so that you will have more marshmallows later? Putting away $20 a month in an RRSP or a special retirement savings account will be a huge benefit to you later in life.

Remember: Mischel’s study had many kinds of rewards. Although investing money is important, you might also invest in other things. Investing in a new kitchen will have the rewards of comfort, convenience, and perhaps sociability when you have people over. Whether your investment is strictly financial, or if it only relates to money peripherally, your gain from a long-term investment will be more than if you focus only on short-term goals.

4. Keep your Eyes on the Prize.

This lesson combines two of the other lessons: avoid temptation and investments multiply. One of the best ways to avoid temptation is to think about the reward that you will have in the future. That reward is sure to be better than a small reward in the present.

You can use visualization to help you focus on your ultimate goals: how will you feel when you achieve them? Where will you be? How will you act? What will you say? Keeping your focus on your long-term financial goals is best for your financial health.

5. Teach your Children about Money.

Mischel studied four- and five-year olds. Even at such a young age, the children’s willpower was an indicator for their life skills and how they would perform fourteen years later. Give your children the skills they need early on to learn about money.

The good news is that delayed gratification can be taught. Help your children learn to make wise choices.

When you go to spend your money, think about the Stanford Marshmallow Test. Then think about how many marshmallows you could buy if you delayed your gratification.