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Department of Extension Family and Consumer Sciences Quarterly Newsletter September 2011 The Marshmallow in Money Fahzy Abdul Rahman, Ph.D. Family Resource Management Specialist “I’ll give you a marshmallow cube. After 20 minutes, if it’s still there, I’ll give you another one; otherwise, none.” How would you fare if the same test is being offered to you? Perhaps, at your age, you would be very likely to pass the test. This may occur for various reasons such as marshmallow is not really something you want (e.g. too sweet) and your mind may have great control over your impulse for marshmallow consumption. Actually, when this experiment was conducted on four-year olds at Stanford University by Walter Mischel, only about one third of the children passed this test. One of the ideas illustrated by the Marshmallow Experiment is delayed gratification. Subjects were presented with something that they really like and were requested to abstain from consuming it in order to get rewards. This psychological concept is reflected in people’s personal finance management such as: The returns of savings: “Don’t touch the $1,000 investment you’ve just made for seven years – if you are able to do so, I’ll give you another $1,000.” In this example, the marshmallow is the $1,000 initial investment while the 20-minute period is changed to seven years. Need vs. want: Delayed gratification denotes a person’s ability to delay consumption in order to maximize over-time consumption. In terms of consumption, a delayed gratification’s ramification is that people control their spending habits to focus on the needs. Purchase of goods and services means reduced savings and investments for important usages such as emergency, college tuition fees, car repair, and retirement. About fourteen years after the experiment, researchers looked into these children’s tendencies in high school. Children who did well in the marshmallow experiment tend to be “more positive, self-motivating, persistent