Saving Money & The Marshmallow Test – Would You Pass?

Dr. Walter Mischel, PhD, conducted a test with 4-year old children in the 1960’s. The children were offered a marshmallow sitting in front of them. If they waited and didn’t eat it, they would receive two marshmallows instead. It’s a fun exercise all about self-control – regulating emotions and behaviors. Dr. Mischel is still following those same children, and can verify that those who waited were more likely to finish college, earn higher incomes, and be less overweight.

Dr. Mischel does not suggest that we always wait for the two marshmallows. He states it is all about having choices, and understanding the implications of each choice. Sometimes it’s good to live life with abandon and have a little fun. Other times it pays to manage our choices for the bigger pay off later…

Marshmallows & Your Money
For an adult, and money, we could compare it to seeking instant gratification or saving the money so it can grow and be used for greater enjoyment later. Or more recently, the Black Friday shopper who just buys anything that looks like a deal compared to the shopper who walks around with a budget and a few targeted prize items for purchase. The trick is to understand what the payoff is later. So here are a couple of examples for you to keep in mind:

Denial & a Small Payoff
You have $100 to spend or save. If you put it away for 5 years toward a really nice vacation, that $100 may mean $148 (assuming an 8% compound growth, compounded twice annually). It is your choice to spend $100 now or $148 in 5 years. You might go for the instant gratification and “eat the marshmallow right away”.

Denial & a Big Payoff
You have $200 to spend or save each year. If you put $200 away for each of the 5 years toward a really nice vacation, that $200 each year could accumulate to approximately $1,545 (assuming an 8% compound growth, compounded twice annually). Suddenly, saving money at $200 a year becomes a much bigger deal, and may be worth the wait. The choice is yours, but now you have a picture of what you might be giving up if you don’t save.

Dr. Walter Mischel’s book is The Marshmallow Test, Mastering Self-Control. You can also find a quick money compounding calculator at Money Chimp Calculator.

Would you pass the Money Management Marshmallow Test?

Carrie Rattle is a Principal at, a web site for women focused on the mind and money behaviors. She has worked in the financial services industry for 20+ years and hopes to inspire women to better prepare themselves for financial independence. Thoughts always welcome:

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