Why delaying gratification is key to achieving your money goals

Can marshmallows determine our fate? More specifically, can our response to them determine our academic, social and financial success? Back in the 1960s and 1970s, Walter Mischel and his colleagues at the psychology department of Stanford University designed an experiment to test the ability to delay gratification in small children aged 3 to 5.

He put a marshmallow in front of the child and told them if they were able to wait 15 minutes to eat it, they would get a second marshmallow. They left the room and discreetly observed the results of how long the children would wait. Some waited longer than others.

What was interesting was that when they tracked these children over time, the ones who were able to wait and delay gratification had better academic scores and got into better colleges. It seemed like they had discovered a key link in our inherent ability to put off immediate pleasure for larger rewards later and long-term outcomes.

Through the years, this test has been refined and more nuances have been teased out, with a developing understanding of how poverty, culture and other environmental factors play a role, but as someone with 16 years’ experience in the classroom, none of these results shock me.

Students who can delay playing and distraction are those who are most often successful. They can focus on work better and get more done. They tend to be kids who read for pleasure instead of being locked to the bright lights of a screen. Of course, they get better grades, go on to better colleges and build careers in difficult fields that require years of dedicated study.

As adults, we are often faced with a larger marshmallow test. Can we ignore the flashing advertisements of our consumerist world, ignore the instant dopamine rush of retail therapy, and instead save money and invest it regularly? Can we put off the immediate benefit of spending our paycheque on fun things and instead build real wealth that can get us freedom from the daily drudgery of jobs we hate?

For most people, the answer is complicated and lies somewhere on a spectrum. They spend more during some months and save more during others. Sadly, far too many feel like investing is too complicated and give their money to “financial advisers” who sell them overly complex products that rarely benefit the person saving, but instead greatly enrich the adviser.

This is why the Financial Independence Retire Early (FIRE) movement is still on the fringes of society and not mainstream, no matter what percentage of people say they want to quit their job or be free of financial worries.

First you have to overcome an adult marshmallow test to save money, then you have to invest wisely, which requires a bit of education, and then you have to have a fairly lucky streak of no emergencies for several years to build up the nest egg that is necessary to get off the hamster wheel and achieve independence. The deck seems stacked against us from the beginning, for a lot of reasons.

When the choice is between brunch with friends and saving money for some abstract future, the easy choice is to do the fun thing. I’ve known people who lived in the UAE for years, making good salaries and who had nothing to show for it, financially speaking, when they left. They had failed the marshmallow test.

Even worse, some lived beyond their means and went into debt, creating difficult legal situations and giant financial holes they had to struggle to escape for years.

A key element in building your ability to defer gratification and meet your financial goals is the support of a strong community. Finding a tribe of people who celebrate your accomplishments and give you resources that guide you on the path to financial independence is critical because you won’t feel like a weirdo when you make different and sometimes difficult choices.

In the UAE, SimplyFi on Facebook is a fantastic and free community that provides such support. There are others around the world as well, like ChooseFi, Bogleheads and the Mr. Money Mustache community. These groups are filled with people at every stage of the journey, from getting out of debt, learning to save, learning to invest, and even those who have already achieved financial independence and quit their day jobs to pursue less lucrative but more rewarding lives.

The world may be set up to make you scarf down the marshmallow of immediate gratification, but you can fight back. You don’t even have to do it alone.

Schoolteacher Zach Holz (@HappiestTeach) documents his journey towards financial independence on his personal finance blog The Happiest Teacher