The marshmallow experiment - the reward is choice.

Which option do you prefer:

A)    In five years, you have the choice to buy your dream car, by just putting $500 a month aside.

B)    You can have your dream car tomorrow by paying $500 a month for the next five years.

 

My guess is most people would choose Option B and would call it free money and might say that they don’t have room in the budget to save for Option A.

Delaying gratification doesn’t provide us with the same immediate reward as getting something now. And, while it can feel like a struggle to save for a purchase, we often find room in the budget when we finance it. The instant reward offered by financing commitments, and the inability to delay gratification, leads to this justifying and malleability in our spending plans.

 

I’m reminded of the 1960’s Marshmallow Experiment. In the Marshmallow Experiment, a researcher left a child alone with a treat (a marshmallow) for fifteen minutes and told the child that if he didn’t eat the marshmallow in that time, he would get a second treat. Delaying gratification meant more reward. Waiting was arguably the better choice.

 

We frequently encounter the Marshmallow Experiment in our own lives. If you wait to buy something you might pay less (specifically if it has interest), make a better choice, prevent stress, or leave yourself open to opportunities. Yet, it can be hard to wait. And even more, we’re encouraged to get the immediate satisfaction – why not finance a car at 0% or low interest? Why not use a Buy Now, Pay Later platform (AfterPay, Klarna, etc)?

 

We aren’t going to get a second marshmallow by waiting, but there is a reward. If you choose Option B above, you’re committed to your choice. You have obligated that amount of income to that purchase. With Option A, you leave your choices completely open. You can change your mind about your dream car and buy a different car; you might decide you love your old car and would rather travel with your savings instead; you might use your savings for a down payment on a house; you might buy your dream car. You are not trapped by your decision. You can meaningfully plan for a decision and make the space for it ahead of time.

 

Car payments are just one example, but credit cards, student loans, and any financing leaves you with the same result: a financial commitment that limits other choices and opportunities. Repeatedly taking options, like Option B, quickly depletes all available income.

 

So, what would it look like to delay satisfaction and make room for opportunities and choices? We need to teach ourselves that delaying satisfaction is worth it - that we will get the reward we seek. In a follow up study to the Marshmallow Experiment, researchers found that children who were in reliable environments were better able to delay gratification because they could trust the reward would be provided.

 

Test this for yourself:  If you haven’t budgeted for something you want (or even think you need), save up for it. Once you have the money for the item, decide if you want it. If you do, buy it. You will train your brain to learn that it can get the reward it wants by making a plan, and along the way, you will leave room for other opportunities and choices.

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shifting From “I don’t have enough” to “I’m choosing…”

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Time Flies: The Importance of Planning Ahead for the Future