The money lessons I wish I had learned growing up

Fifty years ago, Walter Mischel conducted his famous marshmallow experiment at Stanford University – a series of studies on delayed gratification. If you’re not familiar with the experiment, it boils down to this: put a marshmallow in front of a child, tell her that she can have a second one if she can go 15 minutes without eating the first one, and then leave the room.

The concept behind the study was to see whether the child was patient enough to double her payout and if it’s indicative of a willpower that will pay dividends down the line (pardon the pun that will become more evident later!).

They measured this by tracking the children at school through to their forties, monitoring any behavioural issues. Those children who were able to delay gratification went on achieve better test scores, have lower likelihood of obesity, responded better to stress and generally had a healthier lifestyle.

The study was later reproduced with a sample size ten times that of Mischel’s original case study and researchers concluded the underlying success – or lack thereof – was actually down to the socioeconomic backgrounds of the children rather than willpower.

Despite being ‘disproven’ the marshmallow test can still be extremely useful – it was even made into a book in 2014. Although instead of a controlled experiment room, it’s a great learning opportunity for parents when talking to their children about money: it’s an easy and delicious way to explain the idea of compound interest and saving – and it’s just one of many money lessons I wish I had learned growing up.

‘The ability to discipline yourself to delay gratification in the short term in order to enjoy greater rewards in the long term, is the indispensable prerequisite for success.’

– Brian Tracy, motivational speaker and author

Here are some more useful lessons:

1. Credit cards can be dangerous

If you get a credit card without understanding how they really work it can leave you with a snowballing amount of interest and debt. However, as we have discussed previously, credit cards are an important tool to build credit, so they should be an important conversation between children and parents to make sure they are used sensibly.

Life lesson: If you are opening (or already have) a credit card – be responsible – spend what you can pay off immediately. 

2. Live within (if not below) your means

I’m not saying you need to be cheap, but you can make small changes to your lifestyle that help you stay on budget and save some money for the future. Try starting out small, like reducing the number of takeaway coffees, or switching from name brand foods to cheaper store brands.

Life lesson: Be intentional with your money.

3. The art of negotiation

Negotiation is an excellent life skill both in your personal and professional life – money-related or otherwise. While you might not be able to negotiate your weekly shop, you can probably negotiate a used car purchase or even your monthly rent or salary increase. Negotiation can even fall under the umbrella of comparing and shopping around when looking at your energy deal.

Life lesson: It doesn’t hurt to ask for a lower price, the worst they could say is no. Don’t be ashamed, they probably do it too.

4. Not every deal is a good deal

This is one my Dad used to bang on about when I was teenager, but I never really listened until I was in my twenties and had to start paying my own credit card bill. While I admit I still fall prey to the occasional ‘buy three get one free’ offer, I limit my purchases to brands or things I’m already going to be using. Teenage me would go out of her way for a big sale, even if I didn’t need anything, because hey, it’s 60% off!

Life lesson: Anything that causes you to buy more than you need is not a good deal.

5.Start saving early and often

Depending where you are in life, saving can mean anything from starting your emergency fund to making your first investment and thinking about retirement. Planning for your future is something that should start early and always be something in the back of your mind. Again, be intentional with your money. Do you need your fourth pair of black shoes or would the £40 be better served as an investment?

Life lesson: Start saving and planning as soon as you’re able. There’s no such thing as too early. 

The bottom line – two marshmallows in the future is better than one marshmallow now – compound interest is your friend.

The views of the author and any people interviewed are their own and do not constitute financial advice. However the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions. Before you make any investment decision make sure you’re comfortable and fully understand the risks. If you invest in fund or trust make sure you know what specific risks they’re exposed to. Past performance is not a reliable guide to future returns. Remember all investments can fall in value as well as rise, so you could make a loss.