5 Things The Marshmallow Test Can Teach You About Money Management

Tina is an intellectually-gifted bartender who struggles to pay her bills. Tina serves martinis to Susan. Susan is no more intelligent than Tina, but Susan is a millionaire. If not intelligence, then what explains the difference between Susan’s wealth and Tina’s financial lack? And what do sticky, gooey marshmallows have to do with it?

In the 1960s, Stanford University psychology researcher Walter Mischel conducted a longitudinal study. Mischel placed marshmallows in front of hungry four-year-old children. He told them they could have one marshmallow now, or if they could wait several minutes, they could have two. Some children quickly grabbed the marshmallow and ate it. Others waited.

Mischel followed the group and found that 14 years later, the children who eagerly devoured the first marshmallow weren’t faring as well as the children who had waited for two marshmallows. Years later, the “grabbers” suffered low self-esteem. Teachers and parents viewed these kids as stubborn, prone to envy and easily frustrated. The “wait-for-two-fers” possessed better coping skills; were more socially competent, optimistic, self-assertive, dependable and trustworthy; and scored about 210 points higher on their SATs.

Perhaps the key difference between financial lack and wealth is not merely hard work or superior intelligence, but the ability to delay gratification.

What can the Marshmallow Test teach you about personal finance?

1. Avoid looking at marshmallows when you’re hungry

During the Marshmallow Test, some successful kids reportedly covered their eyes so they couldn’t see the tempting treat. My take away tip: Avoid temptation– stay away from the mall when you’re bored.

2. Save a marshmallow today and you’ll eat well tomorrow

The children who waited for the second marshmallow were rewarded with a 100% return on their first marshmallow. My take away tip: Unleash the power of compounding and you’ll be wealthy when you retire.

3. Drooling over s’mores? Wipe your chin and wait for the hot goo to cool– because you don’t want to burn your mouth!

One child reportedly licked the table around the marshmallow while waiting for the experimenter to return. My take away tip: Imagine having what you want, but wait until the time is right to consume. If you shop, wait until you have cash in hand to buy– don’t get burned by finance charges and credit card debt!

4. Stick your marshmallow into the fire, keep your eye on it and remove when perfectly browned– before it bursts into flames.

Some successful children 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 begging greedily for more. My take away tip: Invest in the market, monitor your investment and sell your shares when they reach your target price– before the bubble pops.

5. Give your children mini-marshmallows and teach them how to make rice crispy bars.

Some kids handled the wait by turning their back to the marshmallow, singing songs or talking to themselves. My take away tip: With practice, kids can learn how to delay gratification. Provide opportunities for your child to develop strategies. Give your children an allowance and teach them money management skills.

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Millionaire Mommy Next Door

A self-made millionaire shares her recipe for success, happiness and financial freedom.

22 thoughts on “5 Things The Marshmallow Test Can Teach You About Money Management”

  1. Okay, this has got to be your #1 best post ever. (I’ve been reading, but never commented) I love this and it is so spot on. Brilliant! My husband & I have been talking a lot about this with the real estate market right now. We can afford a house now, but know that if we wait longer we’ll likely get more house for our money. But damn, that marshmallow (house) is tempting!

  2. Interesting study – but in your case MM you told how your family scarcity issues brought you around. My Mom was very penny pinching but there was always money for cigarettes and beer. Five siblings three grew up to spend it all and two of us grew up with the penny pinching. I think I learned delayed gratification because being the youngest -smallest girl in my family it was all about Darwin. Later on when my self-employed spendthrift husband who talked the IRS out of getting his $10,000 debt forgiven and then he needed a ten – thousand dollar settlement from me – (among other things) I allowed this situation to throw my money principles into turmoil. I am back. I had saved $9000 before my marriage when I was kid babysitting and waitressing. I have now saved my second $9000 at 52 y.o.

  3. I am not sure how to react to this. Well, first the post is great, the findings and how you have interpreted them for our wealth benefit is helpful, motivational, and true.

    My concern is on what am I teaching my kids and how I can best teach them how to be like the ‘wait-for-two-fers’ instead of the ‘cant-wait-ers.’

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  5. Jen,

    First, I should say that I really enjoy your site and admire the choices you have made for your family. It seems like you’re exploring your passions and really enjoying each and every day of your life. What a great gift for your daughter!

    Our difficulty with the marshmallow test is in finding the balance between “waiting for it” and “going for it.” In the study, the children were guaranteed two marshmallows if they waited. In life, there are few guarantees. My husband and I always have that nagging worry that our marshmallows are going stale while we’re waiting for them to double. Or that someone will come along and eat it. Or that it will be thrown into a waldorf salad and served to us in pistachio jello. How do you decide, in this world with no guarantees, when you should go ahead and enjoy your marshmallows? Do some people have a tendency to wait indefinitely for a third marshmallow to appear and end up denying themselves of any good marshmallows at all??

  6. How on earth do you keep unearthing these amazing facts? This marshmallow study makes so much sense.

    I do wonder about how (or from whom) the 1960 kids learnt delayed gratification.

  7. What an interesting study. I wonder whether the ability to delay gratification was more inborn or a reflection of upbringing? It’s certainly possible to develop the discipline and willpower to delay gratification later in life, but my first impression of the study is that delayed gratification and success in an inherent personality predisposition. Anyhow, I don’t think I would have been a good child for that study. I don’t think I ever like marshmallows all that much. I would have been the outlier in their results. :)

  8. Mel — you wrote. “My concern is on what am I teaching my kids and how I can best teach them how to be like the ‘wait-for-two-fers’ instead of the ‘cant-wait-ers.’”

    I think kid’s learn best by observing their role models… their parents. If you demonstrate a healthy level of delayed gratification, your kids are more likely to follow in your footsteps. I also find many casual circumstances where I can discuss and teach my daughter about the concept of waiting.

    Jenny wrote: “How do you decide, in this world with no guarantees, when you should go ahead and enjoy your marshmallows? Do some people have a tendency to wait indefinitely for a third marshmallow to appear and end up denying themselves of any good marshmallows at all??”

    Great follow up of analogies! Yes, no guarantees, only probabilities. I like to look at what’s likely to happen, then plan accordingly. And I never deprive myself in the meantime. I say enjoy a percentage of your marshmallows as they accumulate. That’s why my husband and I chose to semi-retire at 40 rather than amass more wealth by working until 65 (and retire dripping in marshmallows).

    Johnny wrote: “I wonder whether the ability to delay gratification was more inborn or a reflection of upbringing?”

    I’d guess a mixture of both — nature and nurture. Certainly, siblings raised in the same environment often differ in their ability to delay gratification, as is the case in my family.

  9. Fun post! I really appreciate Tip #1:Avoid looking at marshmallows when you’re hungry.
    While there’s nothing wrong with admiring or desiring the marshmallow, you don’t need one every time the hunger hits. The most valuable lesson I’ve ever learned- if you want to be happy in your home- quit watching all the home remodeling/redecorating shows! Those shows had me wanting to knock down walls, bring in contractors, lay expensive tiles – or better yet, just go buy a bigger better already perfect place. When I stopped feeding on that stuff suddenly I loved my home again. Great article, great insights!

  10. This was such an enlightening post! I think I’ve often been taught by my parents to think long term. It has served me well, and I plan on teaching it to my children as well. I think the “don’t go shopping when you’re bored” advice is spot on!

  11. That’s a great way of looking at things. I remember as a kid, I would usually save up for things I wanted and I usually ended up with more than my richer friends. I went through a few years just after uni where I didn’t do the things I used to as a kid but I’m definitely back on the right track now.

    Of course, you’re so right, “good things come to those who wait”, a mantra I’m especially pleased with.

  12. Good story, evil picture though… I am pretty sure the dog wasn’t going to get another marshmallow…

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  14. That was a great read! I love the marshmallow analogy and how you compared it to real life tips for adults. I did learn one very very important tip that I can relate to:

    the ability to delay gratification.

    I realized that I am very weak there and I need to work on that.

  15. I shared this post with my husband. He had asked the same thing about how do you teach your kids to wait. I think your answer in the comments of being an example is a good one. We don’t plan on giving allowances, but commissions.

    And yes, not going to the mall, Target, or Wal-Mart is incredibly helpful. Also, not reading magazines and not watching “What Not to Wear” helps you not desire new clothes. :)

  16. New to your blog via SimplyForties blog. Loved this research story. it reminds me of what we did with our 3 sons. Lived on a Caribbean island for a year to teach them the difference between wants and needs. Great posting.

  17. That’s a really great post! So true.

    Some people noted that there are few guarantees in life; I have to disagree. While we’re not always guaranteed to get exactly what we expect, you can’t really say that planning how to use your resources and working hard doesn’t yield better results than busily consuming everything that comes our way. Sometimes what you get is not exactly what you thought you’d get, and sometimes you end up getting even more and better.

    I grew up in Russia, and the times after the Soviet Union collapsed in 1991 were very tough – there was hardly enough food, and no money circulated in the country because of the currency collapse. So when things got better around 1993-94, a lot of people tried to make up for the hungry years by buying more expensive food or clothes. Not my family. We lived 4 people in the tiniest 2-room (not 2-bedroom, 2-room) apartment in a crappy neighbourhood, and we had to do something about it, because constantly being on each other’s heads was ruining our family. So my parents were saving every penny hoping to one day buy a better place. My brother and I were not allowed to buy any food or water, even if we were hungry at school. If we failed to pack our lunch, that was it. We did not buy a new item of clothing in years – all was second-hand. There were no mortgages or any loans accessible for private individuals then, so the only way of saving money was, well, just saving it yourself. In 4 years, we saved enough to buy a 3-room apartment in a decent neighbourhood if we sold the old one. But then, in 1998, the world financial crisis exploded. The U.S. dollar went up from 4 rubles per $1 to 30 rubles per $1, all in 3 days. My parents, who were converting money in U.S. dollars, were suddenly able to buy a comfortable 4-bedroom apartment in a good area, and still have money left. So they did. The sacrifice turned out not just to be worth it, but it brough better results than we could ever hope for.

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