Instant gratification generally refers to the impulsive decisions we make for the sake of immediate pleasure. It’s about getting exactly what we want, right when we want it. In contrast, delayed gratification is the ability to resist those impulses for immediate pleasure, in order to receive something better in the future.
Do we choose to satisfy our sweet tooth, or reap the benefits of a healthy eating plan? Do we hit the snooze button to enjoy an extra hour of blissful sleep, or wake up and commit to our fitness regime? Is the fancy pair of shoes necessary right this second, or is the money better suited for a more worthwhile investment?
We often battle with similar choices everyday, and these decisions often boil down to choosing between short-term satisfaction or being able to wait for long-term benefits.
Would you like One Marshmallow or Two?
Instant versus delayed gratification is an interesting psychological concept in decision-making, and is illustrated in a famous study called the Stanford Marshmallow Experiment. Walter Mischel, a psychology professor at Stanford University, conducted a study on children using marshmallows or treats of their choosing. They were given their favourite snack and had a choice to eat it there and then. They were also told that if they were to wait for a short while of 10-15 minutes and resist eating their treat immediately, their treats would be doubled.
Mischel went on to follow-up with these children much later on, and noted some interesting correlations. His reports, which were consistent with other recent studies, showed that those who opted for delayed gratification instead of choosing to be instantly gratified had:
- Better academic scores and intelligence
- Better social skills and sustained marriages
- Higher income and better financial health; and
- A lower probability of health issues (i.e., obesity and drug abuse)
Is it difficult to wait for a larger reward, or benefit by forgoing an immediate one? Why do some of us struggle with wanting to be instantly gratified when it comes to making decisions?
Our brains are usually conditioned to naturally choose pleasure and comfort, as well as to satiate our dopamine levels. Logically we understand it may not be the best choice, but we consciously and even sometimes subconsciously, do not want to experience the psychological discomfort associated with denying ourselves the instant reward. Sometimes, there is also the factor of probability — we are afraid we might lose the chance of getting the reward if we don’t grab it now.
Implications on Our Finances
Both instant and delayed gratification have important consequences when making financial decisions. Which end of the spectrum one leans to can be a key factor in determining one’s financial success or failure.
Daniel Kahneman, a Nobel-Prize winning psychologist known for his work in decision-making, behavioural economics, and prospect theory. He gives an interesting perspective of the implications of decision-making and its effects when it comes to finances.
Kahneman suggests that as humans, the weakness of decision-making often occurs because we are more emotional than numerate, especially when it comes to mental accounting. He notes that people tend to save and borrow at the same time, instead of treating their whole portfolio of assets as one whole.
People tend to do this because they keep their money in different mental accounts, which they have different rules for. This may not be a bad thing if the math was done right, but people often have a hierarchy of these mental accounts that tend to favour emotional desires, as opposed to the more practical and numerical needs.
If we are more prone to instant gratification, we might splurge on the latest gadget or fashion that’s on sale. We choose to only worry about the credit card bills later on. Perhaps we feel we deserve to splash our money on a luxurious vacation, instead of saving it for our children’s education. We might be tempted to heavily invest in a stock or financial product without taking the time to do proper research, due to peer pressure or us not wanting to miss out on the hype and the “rare opportunity”.
However, if we are more prone to delayed gratification, we tend to take more effort to take a step back, reflect, and consider the future aspects of our decisions and their consequences over time. We will be exploring the intricacies of what affects the choices we make and how to take better control of them later on.
Learn how your decision-making affects your financial decisions as we dive deeper into exploring the areas of loans and investments, and how to safeguard ourselves against common pitfalls of instant gratification.
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