Teaching Children to Save
Can Be a Rewarding Lesson

Now, my children can't have candy until after dinner. Later, they won't be able to retire until they save for 30 years.

Delaying gratification is a skill that children display early on and use all their lives. But not everybody has the same self-control. Some children grow up to be great savers, while others spend with abandon.

Can parents help prepare their children for the constant battle between wishing to spend and needing to save? Experts think so.

"We have a capacity to learn self-control, just as we can learn a language," says Meir Statman, a finance professor at Santa Clara University in California. "When parents teach children that they have to wait -- whether it's to delay eating until after everybody is served or it's to wait for the new bike until next Christmas -- they learn a valuable lesson."

This self-control is critically important, and not just when it comes to saving money. We also need sufficient resolve to stick with our stock-market investments, despite the frequent market turmoil, so that we enjoy the long-term rewards.

Indeed, the importance of self-control extends beyond financial matters. Walter Mischel, a psychology professor at Columbia University, tested four-year-olds to assess their ability to delay gratification. Children, for instance, were offered a choice between one marshmallow now and two marshmallows when the experimenter returned, usually 15 minutes later.

Mr. Mischel found that children were able to wait longer if they could distract themselves from the rewards or if they were encouraged to think about the rewards' abstract qualities, such as their shape and size, rather than thinking about the taste or similar arousing features.

Mr. Mischel later checked on what happened to the youngsters. Those four-year-olds who displayed the greatest self-control grew up to be teenagers who not only did well in school but also seemed better able to pursue goals and cope with stress.

"It's unknown the degree to which this ability is wired in early or acquired early," Mr. Mischel says. But he believes parents can help their children learn to delay gratification. To that end, Mr. Mischel offers five pointers:

• If parents promise their children a reward, they have to keep their part of the bargain. "Unless children learn to believe that it's worth waiting, they won't do it," Mr. Mischel says.

• Make sure earning the reward isn't too onerous for the children. Cleaning their bedroom is fine. Cleaning the whole house isn't.

• The reward for delayed gratification should be something the children want, not something the parents think they should want.

• "The process itself should become rewarding for a child," Mr. Mischel says. If you want your children to practice piano, offer them a reward, but also help them find music that they will enjoy playing.

• Be a good role model. Children are more likely to be good savers if they see that their parents both save regularly and also find saving money to be worthwhile.

When teaching your children to delay gratification, the task and the reward don't have to involve money. But some direct efforts to impart the virtues of saving money are probably a good idea.

Neale Godfrey, author of "Neale S. Godfrey's Ultimate Kids' Money Book," says you shouldn't simply let children have pocket money. Instead, children should receive their allowance in return for doing chores, so that they learn the concept of earning money.

Ms. Godfrey says parents also shouldn't insist that all pocket money be saved for college or bigger toy purchases down the road. "You can't teach delay of gratification unless you teach them instant gratification at the same time," she says. "Otherwise, it seems like punishment."

Even when children aren't spending their own money, try encouraging them to make financial decisions. Last Halloween, for instance, I offered my two children a choice. I would buy them a new costume or they could wear the prior year's costume and receive $10 to spend later. They took the cash.

All this may seem a little manipulative, and it can clearly be overdone. "If you reward every small thing that happens, you'll have a kid who can't do anything unless there's a reward," says Donald MacGregor, a senior research associate at the Decision Science Research Institute in Eugene, Ore. "There needs to be a time gap between what you do and what you get. That's investment."

In addition, you don't want children who are so concerned with delaying gratification that they wind up as misers. Still, given a choice, it's much better for children to learn this self-control. After all, if they don't have at least some capacity to delay gratification, they can't even choose between a reward today and a larger reward tomorrow.

As Mr. Mischel puts it, "Having the choice doesn't mean you have to make the choice. But it gives you the option."

Source: The WSJ 3/9/1999

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