The Marshmallow Test: Self-control in managing your finances

Posted by Namita Gad on 06 Jul, 2018

The Marshmallow Test: Self-control in managing your finances

A very interesting experiment conducted by Stanford University filmed children under a very tough decision-making environment. These children were offered one marshmallow under the condition that they would get a second one if they waited 15 minutes before eating the first one. The researchers then left the children alone in the room. These children then squirmed and struggled to overcome their desire of not eating the marshmallow. On an average, a child lasted for no more than three minutes before eating the marshmallow. Only one in three children were able to control their desire and last the full 15 minutes.

Being a long-term study, the researchers surveyed the group of children after 14 years and found that the children who waited longer to eat marshmallows tended to be better decision makers and had better life outcomes. On the other hand, those who were not able to delay gratification were prone to poor academic achievement and low capacity to plan and think ahead.

Moreover, the self-control displayed by the children had no correlation to their IQ!

So, what financial lessons can we learn from the Marshmallow Test?

  1. Avoid looking at marshmallows when you are (not) hungry
    Some successful kids covered their eyes so they could not see the tempting treat. Financial lesson is to avoid temptation. Stay away from online shopping websites when you receive promotional messages advertising heavy discounts.

  2. Save a marshmallow today and you will eat well tomorrow
    The children who waited for the second marshmallow were rewarded with a 100% return on their first marshmallow. Unleash the power of compounding with long term steady investments.

  3. Control your temptation for marshmallow
    One child reportedly licked the table around the marshmallow while waiting for the researcher to return. Wait for the right time to consume. Do not splurge by using your credit cards, wait until you receive income through salary or investment redemption.

  4. Heat your marshmallow till it’s perfectly brown
    Some successful children closely watched their marshmallow to prevent others from snatching it, waited patiently until the researcher returned with the expected second marshmallow, then enjoyed their reward (without being greedy for more). Lesson here is to invest in the market, monitor your investment and sell at your target price – before the bubble pops.

Watch, enjoy and more importantly learn self-control with practice!

Source for Video: IgniterMedia