If given the choice choice between eating one marshmallow immediately, or two, if they were able to wait for 15 mins, what would you do? Is delayed gratification versus instant a way to look at how we can deal with our own personal finance questions? Which marshmallow choice would you make?
The Stanford marshmallow experiment was a series of ground-breaking studies conducted from the 1960’s onwards, led by the renowned psychologist Dr. Walter Mischel. The studies focused on self-control with regards to a participant’s ability to delay gratification. Delayed gratification is generally referred to as the ability to resist the temptation for an immediate and small reward and wait for a later and larger reward. As such, the overall premise of the experiment was simple; the participants (young children aged 4-6) were given the choice between eating one marshmallow immediately or two marshmallows if they were able to wait for a short period of time around 15 minutes. Surprisingly 1/3 of these young participants were able to delay their gratification and exhibit enough self-control to wait for the later and larger reward. What was particularly interesting was the behavioural coping mechanisms they displayed to employ that self-control. For example, some of the participants averted their eyes from the marshmallow, sang songs, invented games with their hands and feet, talked to themselves and some even tried to fall asleep (successfully in some instances!). What a clever way to ‘speed up’ the waiting period!
Delayed Gratification Equals Better Life Outcomes
Follow-up studies decades later on the same participants from the original marshmallow experiment studies showed unexpected correlations between this ability to delay gratification and positive life outcomes. Mischel found those children that had been able to delay gratification for the later and larger reward tended to have better life outcomes later in life as adults. For example, they reached higher levels of education, had a greater ability to handle stress, had lower BMI’s, lower divorce rates, and lower rates of substance abuse. This study indicates the importance of the development of self-control and appropriate coping strategies from an early age. Importantly, Mischel explained that self-control and coping strategies can be taught (and improved upon) at any age. As such, the kids that took the immediate and smaller reward do have ability to learn self-control to help them in the future where delaying gratification may be a better outcome for them.
Accessing Delayed Gratification With Ease
Numerous times every day we are required to make decisions about what to spend (if at all) our money on. This decision making process is guided by our underlying personality, engrained habitual routines and the connection we have with our financial situation, goals and objectives. In these instances, it’s important to understand the different outcomes associated with making the decision to spend money now (instant gratification) versus saving it for later on for potentially greater reward (delayed gratification). An example of this is redirecting funds allocated towards the daily coffee and lunch purchase (instant gratification) to a long-term savings plan instead (delayed gratification) which with the power of compounding will bring far greater future rewards. With the fintech (financial technology) evolution there are great tools being developed which can help like Acorns which automatically makes a “delayed gratification” investment every time you have an instant gratification spending of your money.
Areas of Personal Finance Where This Applies
While the marshmallow experiment sounds like a bit of fun psychobabble, it did show the importance of self-control and appropriate coping strategies when dealing with decisions involving instant versus delayed gratification. This has potential applications for us in many areas of our personal financial lives like cashflow and debt management, wealth creation through investment, and saving for retirement through superannuation. Ultimately, how you spend our money is entirely up to each individual and in some instances it’s an unavoidable necessity (debt repayments, groceries, utilities, insurances etc). However, when making a decision (even small ones) regarding spending your hard earned money, perhaps take a moment to consider whether you should delay that gratification for a greater future financial reward; and head towards better financial outcomes!
Add Comment