About a quarter of the kids held out for the second marshmallow. But the study\u2019s brilliance was its long-term view, appropriately enough.<\/p>\n
Over the next few decades, researcher Walter Mischel continued collecting data on the children as they grew into adulthood. Spoiler alert: The kids who showed discipline and long-term thinking ended up scoring better on just about every measure — SAT scores, social competence, substance abuse rates, body-mass index, ability to cope with frustrating circumstances, you name it.<\/p>\n
To this day, cynics continue to try and poke holes in the study. The sample size is too small, the kids weren\u2019t diverse enough, maybe the kids weren\u2019t hungry, maybe they didn\u2019t trust that the researcher would deliver the second marshmallow. But those criticisms wither under scrutiny (for example, the researchers used adults the children knew and trusted to administer the experiment).<\/p>\n
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<\/p>\n
The Discount Rate Study<\/h2>\n
Fast-forward to a study released last month by the National Bureau of Economic Research<\/a>. They surveyed older Americans (all at least 70 years old) to ask them a simple question: If you were offered $100 right now, or could wait a year for a higher amount, how much more money would it take for you to wait a year?<\/p>\n Put another way, what kind of return on investment would you demand to invest rather than take the money and run?<\/p>\n The researchers referred to the subjects\u2019 answer, the return, as the \u201cdiscount rate.\u201d Thus, someone who answered \u201c$10 more\u201d ($110 total) reported a discount rate of 10%. Higher discount rates indicated less patience — that it would take a lot more money to convince the subject to wait a year.<\/p>\n And oh, did the answers correlate in fascinating ways.<\/p>\n Surprising no one, there was a strong correlation between subjects\u2019 discount rates and their net worth. The lower the discount rate, the higher a respondent\u2019s net worth.<\/p>\n This\u00a0makes complete sense. Those who are more patient, more willing to delay gratification, tend to be those who save and invest their money.<\/p>\n Subjects whose discount rates were more than one standard deviation higher than average turned out to have a net worth 29% lower than average. In real dollars, that translated to having $130,000 less than their more patient counterparts.<\/p>\n It turns out that this simple patience test has a stronger correlation to wealth than even marriage or religion.<\/p>\n Perhaps even more troubling, these less patient subjects had far less healthy lifestyles. They were more likely to smoke, skip medical appointments, and drink excessively — even after<\/em> adjusting for income, race, education, religion, and gender.<\/p>\n Around now, the skeptics are probably saying, \u201cHey, if I were 90, I\u2019d take the money now, too. I might not be alive in a month, much less a year!\u201d<\/p>\n Fair enough. And the data plays this out: Subjects who had heart conditions or past cancer experiences reported discount rates 13% higher than others. Those with dementia or Alzheimer\u2019s answered with even higher discount rates — 35% higher.<\/p>\n Wondering what the average answer was? A whopping $154, or a 54% discount rate — roughly twice the return\/discount rate that young and middle-aged adults answer<\/a>.<\/p>\n Fortunately, it’s easy to adjust for factors like age when analyzing data.<\/p>\n Which, of course, the NBER researchers did. The results outlined above, showing the strong correlation between low discount rates, high wealth, and better health habits? That data only compares respondents of the same age.<\/p>\n The data acknowledged racial and educational differences as well. Researchers found that, on average, white people\u2019s discount rates were 11% lower than non-white people\u2019s discount rates, hinting at cultural differences in attitudes and the effects of various life circumstances.<\/p>\n There was also a strong correlation between discount rates and education. For every additional year of education, respondents\u2019 discount rates dropped roughly 2%. After all, education is itself a form of investment and delayed gratification.<\/p>\n Why does any of this matter? No one likes naggers, so what’s the point of telling people what they are already supposed to know?<\/p>\n First, the study reaffirms that patience pays —<\/em>\u00a0and well. When the average American savings rate is a paltry 4.8%<\/a>, we as a nation could use a wake-up call to spend less and invest more.<\/p>\n But there is also a cautionary tale writ large in this data. With Americans living longer<\/a> but collecting less money from fixed pensions<\/a>, it matters that older Americans are so skeptical of the idea of investment. If every American refused to invest for anything less than a 54% return, we\u2019d all be in trouble.<\/p>\nDelayed Gratification Impacted Both Wealth & Health<\/h2>\n
Age & Health<\/h2>\n
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<\/p>\nParsing the Data<\/h2>\n
Real Estate Investing, Retirement Savings & Implications<\/h2>\n