Wednesday, August 24, 2011

Marshmallows Can Predict If You Will Be A Saver Or A Spender

In the 1960s, Stanford psychologists conducted an experiment on a group of 4 year olds, and it yielded absolutely fascinating results. They put a group of children, one-by-one, in a room with a marshmallow. They told the children they could eat the marshmallow whenever they wanted, but if they waited till the adult came back they’d get two marshmallows. Recently, the experiment was conducted again, and filmed. So here’s what happened…

It’s pretty strange to watch their behavior. Because they are like little drug addicts. They’re sitting there, trying not to think about that marshmallow, but you can tell it’s the only thing in their whole world. One kid starts smelling it, before putting it down and putting his head in his hands, like he’s 40 instead of 4. Another looks away, trying to pass the time, but his fingers creep over and hold onto the marshmallow, as if to reassure him that his sugary prize hasn't up and vanished.

Only a small number could wait. The researchers studied both groups of children throughout their life, and discovered some fascinating patterns. The low delayers (failers)—those who could not wait until the adult came back to eat their marshmallow—were affected by a number of risk factors that did not affect high delayers (passers). Here is what they discovered:

The Ones That Couldn't wait:

  • struggled more in stressful situations
  • had trouble paying attention
  • had greater difficulty maintaining friendships
  • scored lower on the S.A.T. (by over 200 points)
  • prone to a much higher body mass index
  • were more likely to have drug addictions
So it turns out that this experiment is not just about a bunch of four year olds hungry for sugar. This is about all of us. This is about the power of patience. Financially, we are tested in the area of patience every day. We’re on our way home and we really want something that would be a lot cheaper at the grocery store. But the convenience store is a lot closer. And you’ll always pay for convenience. It’s closer, but it ain't cheaper.

When we delay gratification, not only does it pay off in the end, but it often pays off more substantially than if we had just gone for instant gratification. But you don’t inherit the ability to delay gratification. You develop it. You develop it by facing off against this decision over and over: do we spend more to get the thing we want now, or do we wait? What if we skipped the purchase entirely? The we’d still have the money with us later on when we needed it. And if we skipped the purchase and left it in an account, over time that money could increase through interest. Eventually we’d have two marshmallows instead of just one.

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