The Stanford marshmallow experiment was a series of studies in the field of social science which focussed on delayed gratification in the late 1960’s and early 1970’s.
The tests involved offering a child the choice between a small reward now, or twice the reward in approximately 15 minutes. The rewards were things like marshmallows, cookies etc. The child was left alone with the small reward for the 15-minute period and the results recorded.
Many kids gave in straight away, others fought the urge for as long as they could, and some managed to wait the full 15 minutes. In follow up studies with the test subjects’, researchers found that the children who were able to delay gratification for a bigger reward also tended to have better life outcomes including SAT scores, levels of education obtained, and lower levels of substance abuse.
Essentially, the ability to delay gratification today is scientifically proven to lead to greater rewards in the future.
Investors prove this theory every day. Many inexperienced investors who are young and working will take a short-sighted approach, and target properties that are high yielding but low growth because they are attracted to having the extra income today. In reality they do not need the funds now because they are working!
Over the long term the difference really is stark, and this can be applied to your spending habits as well, it is wise to consider your reasons for investing and think – do I really need one marshmallow now, or many marshmallows later?