Is Your Impatience Costing You?

Research suggests people who are willing to delay gratification might benefit financially.

Woman staring at a red alarm clock
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Impatience, it turns out, can be costly. Research suggests that people who opt for smaller rewards today over bigger rewards later tend to have lower credit scores. In the study by Columbia Business School associate professor Stephan Meier, the most impatient people had credit scores below 620, which means they pay more for loans.

In the 2011 study published in the journal Psychological Science, Meier and his co-authors offered 437 low- to moderate-income participants bigger cash rewards if they were willing to receive the money later. They correlated the participants' willingness to delay their cash rewards with their FICO score, a commonly used credit score. The participants most willing to wait for their cash rewards, had FICO scores that were, on average, 30 points higher than those who were the least patient. People with lower credit scores often have a harder time getting loans, and they pay more for the loans they do get.

[Read: Will FlexScore Replace Credit Score?]

The findings bring to mind another experiment, published in the June 2011 edition of the Journal of Consumer Research, which found that consumers make money choices based on how connected they feel to their future identities. In that experiment, the researchers asked graduating seniors at the University of Chicago to read one of two statements: The first emphasized the enormity of graduating college and how much they would change afterward. The second one did just the reverse, emphasizing that their core identity changes little throughout the course of their life. Then participants were told they could receive a gift card right away, or a bigger gift card later.

The results were clear: Students who read the statement that focused on change were more likely to opt for the lower-valued gift card (worth $120) immediately; those who read the statement emphasizing continuity in their identity were more likely to elect to receive the larger gift card (worth up to $240).

That study harks back to an even earlier, classic experiment, most famous for its use of marshmallows. Back in the 1970s, Stanford University researchers offered children a choice: One marshmallow now, or two later. Based on follow-up studies, the children who opted for two treats later were more likely to be successful in life, suggesting that the ability to defer gratification is a valuable trait.

[See: 6 Fun Ways to Teach Kids About Money.]

The recurring theme in all these studies is delayed gratification: Are you the kind of person who is willing to deny yourself some pleasure today in order to reap greater rewards later? If the answer is yes, you probably have an easier time saving money and, it now appears, maintaining a healthy credit score.

If patience doesn't come naturally to you, here's a trick. The authors of the Journal of Consumer Research study recommend meditating on your future self. As they put it, "[S]imply…maintaining a sense of connectedness to the future self may help resolve these dilemmas, yielding more farsighted choices. Rather than employing guilt or complex incentive schemes pitting the interests of future and current selves against each other, simply fostering the sense that what matters most in defining us persists over time may represent a powerful means to help us persist in achieving important goals."

[See: Your 10-Step Financial Recovery Plan.]

That kind of future-focused thinking might be especially important during major life events, such as college graduation, marriage and divorce, when people are particularly vulnerable to feeling disconnected to their future selves – and also at risk for running up debt and hurting their credit scores.