Learning Finance With The Marshmallow Test

10:44:00 AM Rhea Mocorro 0 Comments

Image from drdeborahserani

It was in 1960 that Stanford University researcher and Professor Walter Mischel conducted a study on longitudinal study. In here the researcher psychologist offers a hungry kid a small reward, in this case a Marshmallow, and provided two small rewards if the kid would wait until the test returned. The absence of the tester usually runs in 15 minutes. In the case of the Marshmallow, if the kid would wait, he or she will have another Marshmallow. Some hungry kids tend to grab the Marshmallow and eat it right away. Others tend to wait.

If you were the kid back there, would you eat the Marshmallow or would you wait?

In follow-up studies, the researchers found out those children who were able to wait longer for the preferred rewards have better life outcomes. This holds true in terms of their SAT scores, educational attainment, BMI and other measures. Those kids who devoured the Marshmallow eagerly weren’t faring well with the other kids. The grabbers suffered low self-esteem. And these kids are stubborn, prone to envy and easily frustrated. The waiters have better coping skills, competent, optimistic, dependable and trustworthy.
The Marshmallow Test certainly opens to a lot of learning not only with regards to the self but also with regards to finance. Yes you read that right! In fact, there are a lot of things we can duly learn from it as to how we should manage our money.

Here are these items:

Delaying Gratification

The Marshmallow Test is indeed one good example of delaying gratification. In here, if the kid would wait a little longer, he or she can be able to double up the reward, in this case having two mallows instead of one. With regards to personal finance, delaying gratification is also key. As such, no one gets rich overnight in the stock market or whatever investment. This needs a lot of time, efforts and a lot of waiting. That is why most individuals who cannot wait for their money to grow then pull out and lose. While others who were patient enough to wait see their investments grow hence they were able to reap the great rewards and benefits.

Saving

The Marshmallow Test is surely a test of how far can we go to save. As such, the kids who waited gets a 100% reward on their first Marshmallow. Hence, they were able to save tight on one Marshmallow in order to get another one within a span of time. In this case, it would surely be wise to save our money in order to yield returns in the long run. It may not be as big as the Marshmallow Test but bottom line is we can be able to get more in the process. Unleash the power of compounding interest and for sure you will be rich after x number of years.

Avoid Temptation

True the hungry kids can simply devour the Marshmallow in an instant when no one is looking. However, most of them tend to avoid the temptation and just sit steadily there directing their thoughts via a song or simply not looking at the mallows. Hence, they were able to wait. Just like the kids, we are easily tempted to spend our money if given an opportunity. Good examples of such would be going to malls, dining in somewhere expensive and what not. If we can just redirect our attention and not go there, we won’t be able to spend much right? Hence, avoid temptation whenever necessary.

The Marshmallow Test is relatively an easy Test. However, the depth of its learning and outcomes can be applied not only to a kid’s growth but also to our finances. Hence, be the better kid and wait for the reward.





P.S. To those doing the 52 Week Money Challenge and 52 Week Money Challenge Version 2, it is Week 14 already! Did you deposit the next amount yet?

P.P.S Want to know more about investing, savings, stock market and more, check out my reference here. You can download free ebooks and resources too.

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