Tag Archives: delay of gratification

Reprinted from cnbc.com, "Why you'll still have a hard time saving money, even if you get a raise" by Darla Mercado.

Adam Anderson and Eve De Rosa

If you were hoping a raise would help you pad your emergency fund, prepare to be disappointed.

That's because your brain has learned to prioritize earning more money over saving it, according to a recent study from a team of neuroscientists at Cornell University.

"There's this implicit blame that people aren't working hard enough and that the lack of savings is a reflection of work ethic," said Adam K. Anderson, associate professor at Cornell University's College of Human Ecology and co-author of the report. "But the data suggest that while people work a lot and work hard, saving is a problem," he said. Indeed, roughly 55 million people have nothing saved for an emergency, according to Bankrate.com. That's no surprise considering that wage growth has been tepid. Further, workers are grappling with an array of competing priorities, including repaying their student loans and saving for retirement.

Here's how your brain is also keeping you from putting money away.

Monetary reward

The neuroscientists studied 78 men with a mean age of 21 and were told to associate one color with "earning," which would have them gain 30 cents, and another color with "saving," avoiding the loss of 30 cents. Participants were given a timing perception task, which would measure how quickly they responded to the colors and chose to either save or earn. In one experiment, nearly 90 percent of the participants earned more than they saved. Three out of four also reported that they saw the color associated with earning on the screen first, when in reality they were seeing the color that corresponded with saving. "You're performing the same job, and you're earning or saving for an equal amount of work," said Anderson of Cornell. "But at the end of that, it seemed easier to perform the task associated with earning," he said. "They responded more quickly and made more money."

Changing your mentality

The scientists surmised that the preference for earning money over saving is a learned behavior. "It's rational from the brain's perspective: You must earn before you can save," said Anderson. "It could partly be cultural," he said. "We brag about work ethic and earnings, but we don't talk about coming up with a cool savings plan." In order to change up your behavior, practice being mindful of squirreling away cash.

1. Acknowledge the problem: It's no secret that a variety of priorities and expenses are competing for your hard-earned dollars, but be aware that merely making more money won't necessarily solve your problems. That's especially the case if you're blowing your raise instead of pocketing it. "For the majority of people, if you make more money, the savings won't match it," said Anderson.

2. Make the choice to save: Having a slice of your paycheck automatically go toward an emergency savings account can help you build your cash reserves without thinking about it. But if you want to change your mentality on saving versus earning, you should also make the active choice to put away a dollar a day, said Eve De Rosa, associate professor at Cornell University's College of Human Ecology, and co-author of the report. "Saving a dollar a day isn't going to accumulate into a fantastic abundance of savings, but this daily practice of attending to saving makes you mindful," said De Rosa.

3. Think ahead: We prioritize the present and attach less importance to the future, which may factor into why people prefer to earn instead of save. "It helps to think about the future us and what we can do for that person," said Anderson. "You can imagine that people default to 'I should earn more,' but the idea is that you want to save for that person in the future," he said.

Reprinted from the Cornell Chronicle, Oct. 31, 2016

 

Researchers in the social sciences have been searching for a holy grail: an accurate way to predict who is likely to engage in problematic behavior, like using drugs. Over the years experts in economics, psychology and public health have designed hundreds of questionnaires in an attempt to understand who will binge drink or have unprotected sex – and why.

reyna_valerie_web

Valerie Reyna, Professor in Human Development

Valerie Reyna, professor of human development, and Evan Wilhelms,

Evan Wilhelms, Ph.D., Cornell Graduate School, '15

Evan Wilhelms, Ph.D., Cornell Graduate School, '15

Ph.D. ’15, of Vassar College, have just taken a sizable step toward answering those questions.

In a new study, Reyna and Wilhelms have debuted a new questionnaire that significantly outperforms 14 other gold-standard measures frequently used in economics and psychology. The measure’s 12 simple questions ask in various ways whether one agrees with the principle “sacrifice now, enjoy later.” Their study, “Gist of Delay of Gratification: Understanding and Predicting Problem Behaviors,” appeared Aug. 10 in the Journal of Behavioral Decision Making.

“People who get drunk frequently, party with drugs, borrow money needlessly or have unprotected sex disagreed more with the concept ‘sacrifice now, enjoy later’ than people who didn’t do these things,” Reyna said. “Instead, they leaned more toward ‘have fun today and don’t worry about tomorrow.’”

Having fun is generally good, she said. “But not being able to delay gratification can interfere with education, health and financial well-being, and the impact is greater for young people,” she added.

The questionnaire is based on Reyna’s fuzzy-trace theory. It says people boil down their personal values into a simple, qualitative “gist” of an idea – such as “sacrifice now, enjoy later.” When they have to make a life decision, they retrieve that gist and apply it to their situation.

In contrast, prevailing theory, with many questionnaires based on it, says that people make specific, quantitative trade-offs known as “delay discounting.” For example, those measures ask questions like, “Would you like $10 now or $11.50 in a week?”

“People do size up the trade-off, but they don’t make their decisions on that analysis,” Reyna said. “They think, ‘sacrifice now, benefit later.’ And therefore they study for the exam rather than go out to the party. It’s not about the party per se. It’s about the life principle.”

The researchers conducted four studies to get their results, comparing the measure, the Delay-of-Gratification Gist Scale, against 14 others. The Gist Scale’s questions include, “I wait to buy what I want until I have enough money,” “I think it is better to save money for the future” and “I am worried about the amount of money I owe.” Money is used as a “stand-in” or proxy for tempting rewards.

The first study asked 211 college students to take the Gist Scale and other measures that predict poor financial outcomes. The second and third studies, with 845 and 393 college students, respectively, compared the new measure against others involving delay discounting. With 47 teens and adult participants, the fourth study compared the Gist Scale against a widely used measure of impulsivity.

The Gist Scale is not only more accurate, it’s also shorter and simpler – some other measures are more than twice as long. It is also gender and age neutral, meaning it can be taken by anyone.

Reyna points out that cultures all over the world have aphorisms that encourage the ability to delay gratification. That skill can improve with practice, she said.

“Sometimes we send young people very mixed messages about struggle. I think it’s extremely important for them to know that struggle and pain are part of life and to be expected,” she said. “Staying the course, keeping your eyes on the prize – these values make a difference. And they can be taught and they can be practiced.”