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Teaching Kids Finance: Delayed Gratification Is Key

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Delayed gratification is key to financial success. Unfortunately, not many parents teach this invaluable skill to their children. So, what is delayed gratification, and why is it so important?

Delayed gratification is defined as “the act of resisting impulse to take an immediately available reward in the hope of obtaining a more-valued reward in the future. The ability to delay gratification is essential to self-regulation, or self-control.”

Delayed gratification is a concept widely studied in Psychology and Economy. For example, in their 2018 study, published in Frontiers in Psychology, Temple University researchers used machine learning to better understand what human qualities are most likely to predict financial success. PsychCentral writes that “although education and occupation were the best predictors, the researchers found that a person’s ability to delay instant gratification was also among the most important determinants of affluence.

Most of us don’t practice delayed gratification.

Unfortunately, not everyone can successfully practice delayed gratification as adults. Many of us suffer from impulse spending. Not being able to understand the consequences of every dollar spent, and forgetting that a dollar borrowed today will cost much more than a dollar tomorrow, results in many unnecessary purchases, leaving marketers and bankers happy. As stated by Jason Wheeler, CEO of Pathfinder Wealth Consulting, “Too often, our society focuses on fulfilling an instant desire and therefore fails to see the long-term effects of unnecessary spending.”

How many times have you bought an item in the spur of a moment that you didn’t need and used the funds you didn’t have to make the purchase? Most of us have probably done this more than once.

Marketers and banks feed off of our inability to delay gratification.

Marketers know of our desire for instant gratification and effectively use it to sell us stuff. How many times have you stumbled upon a discount that was only applicable for the next several days after you signed up for something? How often have you seen headlines saying “lose 7lbs in 7 days”? And how many times have you gone onto a website where a chat or special offer popped-up instantly? All these are the strategies based on the notion of instant gratification – our inability to delay a certain action in order to weigh all the options and ultimately gain more rewards.

Falling under the charm of marketers, we often end up making impulse purchases. We buy things we don’t need using funds we don’t have to make ourselves feel good in that instance. Leading us to end up in debt, often paying an excess of 25% a year in interest charges on our credit cards.

That is why it is so important to be able to delay gratification, to stop and think whether you need to purchase this item now, to allow yourself time to weigh all the options and save money for the purchase. The discounts will always be around and that amazing deal you are being offered only today is likely not as amazing as it sounds at that moment.

Does your child pass the delayed gratification test?

One of the most popular tests on delayed gratification is the so-called “marshmallow test”, pioneered by the American psychologist Walter Mischel and his colleagues from Stanford University.


The marshmallow test can be performed in a home setting, and will probably leave your child happy no matter the outcome. Sit your child at an empty table, with no distractions around (no toys, and definitely no screen she can see). Put a marshmallow* in front of your child, tell them that they can have a second one if they can wait 15 minutes without eating the first one, and then leave the room or start doing your own task, but do not interact with your child or sit at the same table. If they are patient enough to wait 15 minutes, give them a second marshmallow. If your child passed the test, it is great news! This means that they already have at least the minimal will power, and if you nurture and develop it, they will likely have a much easier time growing her money and staying out of debt as an adult. If your child cannot wait for 15 minutes to get an additional marshmallow, don’t worry. This simply means that you will need to work with your child to develop the skill of delaying gratification.

How to help your child learn to delay gratification?

As a parent, you can do a number of things to help your child learn and/or develop the invaluable skill of delaying gratification:


  1. Help your child set realistic goals and work towards them. A great way to do so is to identify a large-ticket item your child would love to purchase, and set a savings goal. Do not purchase this item as an unexpected gift, but instead let your child save for it herself.

  2. Teach your child to save money. Help your child save towards their goal by paying some money for the chores, good grades, or a regular allowance. You and your child should regularly track their progress towards the set goal. You will be surprised at how excited and patient your child will be to work towards the goal making the successful achievement more impactful. Consider an application such as Pennygem, that allows you to pay interest on the saved funds. This will motivate your child and teach them about real-world finance.

  3. Discuss realistic time frames to achieve the goal with your child. Set a deadline by which your child expects to save for the item and discuss why it is an appropriate time frame.

  4. Teach your child to prioritize. Discuss with your child which goal is the most important and help them choose only that one goal to work towards first.

  5. Help children create a plan. Discuss the steps your child will follow to achieve their goal, write them down, and celebrate once each step is executed according to the plan.

  6. Celebrate when the goal is achieved. Reward your child for achieving the goal. If your child was saving for an item, an obvious reward would be to purchase it.

  7. Teach your child to develop “if-then” plans. If a goal cannot be achieved for some reason, what is the alternative?

  8. Teach your child self-control. Reward your child for exhibiting self-control, and demonstrate self-control yourself. Examples of self-control are sitting down for 30 minutes - one hour straight to do homework and postponing watching TV until the homework is done; eating sweets only after dinner; watching TV only after all the toys are put away.

  9. Teach your child to use distractions. Create situations in which your child has to wait for something, and teach them techniques such as counting backward, sketching with a pencil, changing the focus of attention to something else, thinking about future plans, or any other technique that you can think of.

Use an application such as Pennygem to make some of the above exercises very engaging and easy as a 1-2-3. With Pennygem, your child will be able to set saving goals, see their progress towards them, and much more.


Read this Psychology Today article for more ideas on how to practice delayed gratification with your child. 

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