Gordon Powers

One of the nice things about watching kids grow up is that they eventually start to appreciate some of the things you taught them way back when — like the advantages of holding off a bit and not rushing out to spend every single cent you can get your hands on.

As adults though, we sometimes forget to follow through on that early advice.

Years ago, psychologist Walter Mischel conducted an experiment on a group of four-year-olds. He offered each child a marshmallow, telling them they could have it now, or if they could wait several minutes, they could have two.

Some children gobbled the marshmallow on the spot and some were able to hold off as instructed. Of the more than 600 kids tested, however, only one third could exercise enough self-control to be rewarded with the additional snack.

Mischel discovered something interesting about that group of kids. Without exception, they all relied on the same mental strategy: they found a way to keep themselves from thinking about the treat, directing their attention away from temptation.

Some covered their eyes or played hide-and-seek underneath the desk. Others sang to themselves or pretended to take a nap ... in other words, anything to take their mind off the marshmallow.

It wasn't that they'd forgotten about the treat in front of them, they just decided that having another one was worth waiting for.

When Mischel followed up on the children as adults, he discovered that those who simply couldn't wait generally had low self-esteem and had suffered in school, branded by both their teachers and parents as being stubborn, envious and easily frustrated. They also had difficulty dealing with stress and shied away from challenges.

On the other hand, those who didn't eat their marshmallows that day were generally more self-motivated, successful in school and considered emotionally intelligent.

Of course, it's not enough just to teach young people mental tricks. The real challenge is to turn those tricks into action, which requires years of diligent practice since most of us aren't wired this way.

We want what we want, when we want. But there's always another way to go.

In subsequent studies, researchers managed to track down some of the original subjects and conducted brain imaging analyses on them.

In those who had been able to delay gratification originally, the prefrontal cortex, which is associated with reasoning, was much more active — as was an area of the brain which controls impulses.

Those less able to wait for the payoff had less activity in both of these regions, but more activity within the limbic system, an area associated with pleasure and fear.

But neither group was necessarily hard-wired a certain way. Many researchers believe these sorts of brain variations result from a lifetime of using the brain differently, not from some pattern determined in kindergarten.

In other words, it's all about learned behaviour.

In order to be able to delay gratification you need to decide what's more important. Is it driving a beautiful new car on a three-year lease or a buying a pre-owned vehicle with cash? Monster house with a mortgage or a duplex with tenants sharing your costs? Or maybe you should simply rent?

The children who learn to wait will grow up into the adults who will save for a bigger down payment on a house before they buy, put money aside for a rainy day and ultimately, save more than they spend.

Even though you're not a kid anymore, it's still not too late to examine how you make financial decisions. Take a close look, for instance, at possible retirement scenarios and then see if you're even close to where you should be.

While many of the people I talk with think this exercise is simply going to make them miserable, a recent study found just the opposite. Actually doing some real world calculations tends to be a very effective tool in changing behaviour — in a good way.

When the Employee Benefit Research Institute quizzed working-age people on their attitudes toward retirement only 42 per cent reported that they'd tried to figure out the amount of money they would likely need to live comfortably.

However, those who had taken the time to review their affairs admitted that the impact of such an assessment was dramatic.

  • 26 per cent reported feeling more confident about meeting their retirement goals
  • 59 per cent started saving or investing more
  • 19 per cent changed their investment mix
  • 16 per cent reduced debt or spending
  • seven per cent researched other ways to save for retirement

Their parents would be so proud.