24 Nov The Marshmallow Test and your money
In 1960, Walter Mischel, a professor at Stanford University first conducted what is now known as the ‘Marshmallow Test.’
The experiment took place at the Bing Nursery School located at Stanford University, using children aged between four and six as subjects. The children were led into a room, empty of distractions and a treat of their choice (cookie, marshmallow, or pretzel stick) was placed on a table, by a chair.
The children had two choices: eat the treat now or wait for 15 minutes and be rewarded with another one!
This was clearly a tough test for the children. Mischel observed that some, “cover their eyes with their hands or turn around so that they can’t see the tray, others start kicking the desk, or tug on their pigtails, or stroke the marshmallow as if it were a tiny stuffed animal.” Others would simply eat the marshmallow as soon as the researchers left.
The purpose of the study was to understand how the control of delayed gratification – the ability to wait for something that one wants – develops in children.
Over the last 50 years, this experiment has been repeated several times in different countries, and the results are rather interesting.
According to Mischel, the way these kids behaved as they did or didn’t manage to delay gratification, unexpectedly turned out to predict quite a bit about their future lives. The longer they waited at age four or five, the higher their SAT scores. And their social and cognitive functions were also rated better in adolescence.
The Marshmallow Test suggests that the ability to delay gratification plays a crucial role in the successful pursuit of long-term goals. It’s essential for developing empathy that’s needed to build caring and supportive relationships.
In a sense, investing for the future is about delayed gratification. We often have to choose between spending money today or investing it for the future – hopefully in return for more money.
So, what can we learn from the Marshmallow Test about how we manage our money?
In the study, even the children knew that ‘out of sight, out of mind’ was the easiest way to exercise self-control. If the treats were in front of them on a tray, the temptation was too great, and they found it hard to wait. But when the researchers placed the marshmallows under the tray, obscuring them from clear view, self-control came more easily.
In a personal finance context, one way to reduce the temptation to spend is to keep any money earmarked for long-term goals out of your every-day deposit account. This is why it’s often a very good idea to deduct pension contributions from your salary or directly from your business account before it reaches your bank account!
Another takeaway from the Marshmallow Test is the importance of reward. Saving for retirement is one big goal that often takes many years, even decades. It’s important to celebrate important milestones along the way. This serves as a reward for good effort, and reinforces our willpower to stay the course!