June 14, 2015

Delayed Gratification, What is it? And Why Should We Teach it to Our Children?

I have long thought that if there is one trait I want to help my children develop when it comes to finances, it is the ability and desire to Delay Gratification.
Of course delayed gratification applies to many other things.

Simply put, delayed gratification is the ability to resist an immediate desire, for something better in the future.
Delaying Gratification requires:
Self Control.

Examples of Delayed Gratification:
Saving/Investing Money (resisting spending money now in order to have/spend that money in the future)
Dieting (resisting food now for weight loss in the future)
Studying (resisting playing now in order to have better grades/opportunities in the future)

Penny Stack

I've never been wealthy so I guess in many ways I don't know much about building wealth. However, what I do know what building wealth looks like on our income, our family lives quite comfortably simply because we have delayed gratification.
In our marriage we've chosen inexpensive clothing, meals made from scratch, cheap entertainment, forgone vacations, older vehicles, small/old apartments, in order to pay cash for vehicles, put 20% down on our house, and invest for retirement.

But, for me it started before that.
I've shared my Disneyland necklace story here before.
Over the years I saved for many other things and made choices I was happy with, as well as choices I've deeply regretted.

This story is bigger than that.
In my family we were always expected to pay tithing and put a percentage of our income in savings. We had both short-term and long term savings as well as immediate spending.
I was always pretty good at short-term savings, I would decide on something I wanted and work diligently toward that goal.
But my long-term savings is where I really learned the benefit of saving.
Days after graduating from High School, I moved to St. George, UT to work for the summer and attend Dixie State College in the fall.
My parents and I had an agreement that they would pay for tuition, but I was responsible for books and living expenses. 
I had a job lined up, but when I walked the mile to work that first morning I found an empty office. I called my supervisor and found out that the company had moved to a location about fifteen minutes away, driving time, but the problem was I didn't have a car. It would take me over an hour to walk there in the St. George summer heat. Other events transpired and I decided that I needed to find another source of employment. It took me a month to find a job. I was grateful that my parents had taught me to save, I used up a significant amount of my savings, which I was planning on using to buy books and pay rent for fall semester, but I was ok. I was so grateful that I'd chosen to save a percentage of my high school income, even when that meant turning down activities, opting for the dollar menu, skipping movies, or just the concession stand, etc.
Once I found a job I became determined to have an emergency fund. The few times since then that I haven't had one left me worried, and determined to find a way to replace it.


So how do we teach kids to employ delayed gratification in their financial decisions?
I wish there was a straightforward answer. There isn't, but here are some ideas:
* Buy them less, and provide a way for them to buy things for themselves, through earnings or allowance (you can read my post on allowance here)
* Encourage children to save toward something big. 
    Big is relative to their financial means; for my 3yo who has $0.45/week after tithing/savings, big is a $5 airplane
* Allow them to make mistakes and then DON'T RESCUE THEM.
* Discuss their regrets while withholding criticism.
* Encourage them to set goals.
* Verbally reward them for progress.
* Encourage open-ended saving.
    Saving for things they will want in the future without a particular goal in mind
* Say No.
     Or:   It's not in the budget.   or  Is that how you want to spend your money?   or   That's not something I'm choosing to spend my money on today.   
* Get kids involved in the family budget. Certain categories like clothing and entertainment, even gas or groceries can (and possibly should?) be influenced by older children. 
     Let them figure out how to pay for the vacation or activity they're drooling over
* Put them in charge of planning, shopping, and cooking a family meal, give them a reasonable budget, and let them keep the extra, or go out for ice cream with the remainder
* Match their savings, with a cap 
     ie for every dollar you save toward your first car we'll match $.50 up to $3k, or for every dollar you deposit in your college fund, we'll match $2 up to $15k, whatever works for your family budget.
* Teach them ways to have fun without spending money 
* Give them money to buy their school clothes and let them budget and figure out their priorities, after reminding them that they'll want socks and underwear ;)
     With some kids you might have to stipulate that ALL of the money must get spent on clothes, with others who are accustomed to and enjoy having a nice wardrobe, they may have the opportunity to keep the remainder if they come in under budget
* Let your kids see you practice delayed gratification
     Talk about what you're saving to purchase. Make comments such as I'm cutting this expense, or I'm not buying that so I can put the money toward _________. 
* Don't just wait for things to go on sale, let them know that's what you're doing.
* Share how you feel when you finally pay off your credit card, car, or house.
     Let them know what a blessing/relief it is to not have debt. Talk about what you can use that money for instead of that payment.

If you're interested in reading more about the benefits of delayed gratification interesting articles can be found here, here, and here.

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