What can the toddler candy challenge teach us about investing?
You may have seen the videos circulating around the web of adorable little kids being tempted with a bowl of candy. This cute form of torture is the toddler candy challenge. By the looks on their faces when they finally indulge, the wait is worth the reward!
What can the toddler candy challenge teach us about investing? More than you might think.
The ability to delay your own happiness, to defer gratification, is the key to life and investing.
In 1972, researchers at Stanford University gave a group of five-year-old children the following choices: they could have one sweet now or, if they could wait just fifteen minutes to indulge, they would be promised two treats instead of one. Ten years later researchers found the teenagers who had deferred their gratification were also healthier and better students than their impulsive peers.
While subsequent studies have called into question the original study, investors would do well to practice self-discipline as they can. The average American was only saving 8.8% of their income before Covid-19*, yet some experts suggest it should be closer to 15%!
How do we close the gap? How can we save more as a treat to our future selves?
The answer is simple, but not easy. As Warren Buffet says: don’t save whatever is left over after spending; spend whatever is left over after saving.
At Deupree James Wealth Management, our financial advisors can help you be smart^er with your money. Check out our Smart^er Retirement Checklist or give us a call and we’ll be happy to offer suggestions on how to might optimize your savings, investments, and taxes.
*The U.S. Savings rate spiked to 33% in April 2020 according to the Federal Reserve.