You may have heard of an experiment undertaken in the 1960’s where children aged 5 were asked to delay eating a marshmallow for 15 minutes. If they succeeded, they were rewarded with a second marshmallow.
Watching the YouTube clip is one of the funniest videos I’ve watched in a long time because 15 minutes to a five year old is an eternity! During the video, you see different children have various coping mechanisms. Some sit on their hands, some smell the marshmallow, one girl nibbles around the edges, some look away or sit backwards whilst some children simply eat the marshmallow.
Studies over the next 40 years have found that those children who didn’t immediately eat the marshmallow and were rewarded with a second one (deferred gratification) went on to succeed in various life indicators:
- Higher school grades
- Higher income earning capacity
- Lower obesity
- Lower substance abuse
- Longer relationships
- Greater wealth
As a financial planner I regularly see the effects of instant gratification and the negative impact it’s having on people’s wealth. With emphasis on having things ‘now’, fancier lifestyles, greater use of smartphones, higher credit card debt and TV shows like the Kardashian’s, there is a greater propensity than ever to be instantly gratified with “stuff”. I see fewer and fewer people deferring rewards into the future which is playing havoc on people’s wealth.
I understand that our lifestyles should be balanced. Let’s face it, no-one wants to feel like they are living on the poverty line! However the concept of ‘saving’ or ‘spending less than you earn’ is disappearing and is adversely affecting the success of people’s financial future.
Although it may be an uphill battle to alter people’s behaviour, I’ve made it my mission to help people make smart, long-term financial decisions by developing various tools to assist our clients. If you, or someone you know, would like more information about this, please contact us.