Financial advice includes some broad ideas that apply to a lot of people. Nuggets of wisdom like “pay yourself first” or “diversify your portfolio” are time-tested and never go out of style. However, there are certain financial lessons that can backfire if their teacher, including you, is not careful. For Financial Literacy Month 2022, we are sharing financial literacy lessons that can do more harm than good if you’re not careful, as well as advice for teaching the core concept.
An important sign of maturity is the ability to wait or work toward a long-term goal or reward. This ability is called delayed gratification. There is a famous experiment that is sometimes cited to support delayed gratification. Stanford University performed an experiment on delayed gratification in children in 1972. It is sometimes called the “marshmallow experiment.” In a nutshell, children were given the choice to take a marshmallow on the spot or wait 15 minutes to receive it and an extra marshmallow. The children’s SAT scores and Body Mass Index were later measured in young adulthood. Supposedly, the children who delayed gratification by waiting for marshmallows grew up to become more competent and responsible.
The Complex Mind of a Child
However, a follow-up version of this experiment in 2012 revealed a missing factor. Why should children trust that the scientists would bring an extra marshmallow? They are brought into a strange room, introduced to a stranger, and offered a marshmallow. If they take the marshmallow up front, there is zero chance of losing that marshmallow. Could that represent pragmatic decision making? Is settling for one marshmallow its own show of restraint? Were some percentage of the “patient” children simply gullible? Why were BMI and SAT scores considered measures of personal quality?
Of Marshmallows and Money
The point is, tempting children with marshmallows does not demonstrate their complete decision-making process. It is not a good model for reinforcing delayed gratification. Instead, you can teach children to save up over time by literally saving up money over time toward a goal or reward. Feel free to offer the chance at smaller purchases as teachable moments. “If we buy this less expensive thing now, we will have to wait longer to get the more expensive thing.” Sometimes it’s okay to spell out the “why” of an exercise. The lesson will be more meaningful coming from you.
Also, tabletop games like Catan (available to reserve for yourself in the Library of Things) and Machi Koro are good at asking players to choose how to dedicate their resources in the short term in order to reach a long-term goal. If someone cites the marshmallow experiment to you in a speech or book about finance, remember to give kids a little (figurative) credit and speak to them directly.
Here are the other blog posts in this five-part series: