Here's a conversation starter...

Most people agree that they really should be saving for retirement, but not everybody does so.

Next time your family is gathered round the table for Sunday lunch, ask them if they know why this is.

Here’s some relevant research so you can impress them with your knowledge.

Instant satisfaction v delayed gratification

In this famous 1960 Stanford University test, Walter Mischel and team gave 600 children the choice of eating one marshmallow now, or waiting for 15 minutes and getting an additional marshmallow.

The experiment has often been repeated. Here’s just one example:


A minority ate the marshmallow straight away. Of those who waited, only one-third waited long enough to get the second marshmallow.

What’s more, it turned out that the children that were able to wait tended to get better outcomes in life (just like those who invest over the long term).

This shows that over two-thirds of people prefer instant satisfaction to delayed gratification – spending now instead of saving for later, if you like

Why not try it with your own children or grandchildren to see what they do?

Aged avatar experiment

A social psychologist at New York University, Hal Hershfield and colleagues conducted a series of experiments.

Subjects wore a virtual reality headset as they looked at an image of themselves (their avatar) for one minute. Half of them saw themselves as they really were. The other half saw an image of themselves artificially aged to look about 70. Both groups then spoke to a researcher avatar.

The researcher asked them to imagine they’d received a windfall of $1,000, and asked how they would allocate the money between four options:

  • Buy something nice for someone special
  • Invest it in a retirement fund
  • Plan a fun and extravagant occasion
  • Put it in a current account

(The options didn’t include my favourite: spend a bit, save a bit, give a bit away.)

People who saw their actual likeness put on average $80 into their retirement account.

People who saw their future selves put an average of $172 – more than double.

The theory is that, not only do we have trouble weighing present rewards against future ones, but there is also a disconnect between our current and future selves.

Maybe you could try this experiment too, using one of the many ‘age your face’ smartphone apps.

Source: To sell is human by Daniel H Pink

Nudge theory

So what’s the answer?

By making a new behaviour Easy, Attractive, Social and Timely (the EAST model), it seems more people are likely to do it.

For example, the UK government wanted more people to save into a pension scheme. By forcing employers to auto-enrol their staff (so employees have to opt out rather than opt in) pension sign-ups increased from 60% to 80% within six months.

Source: Nudge by Cass Sunstein & Richard Thaler

By contrast, only half American workers are enrolled in a workplace pension scheme, and most of those save too little to fund a decent retirement.

Source: Research by Pew Charitable Trust quoted in Forbes


If you do try these experiments or have the conversation with your loved ones, do let us know how it goes!

Lance Baron

Certified Financial Planner (CFP) based in East Sussex, UK. We support people in Southeast England with more than £500K to invest by building a financial plan that will help them live the life they want… until age 100