Delay Gratification – the key to financial literacy

Published: January 27, 2015 at 9:22 am

Last Updated on

Every now and then, one can find an article that says, ‘should we teach financial literacy in schools?’, where the authors talk about the importance of power of compounding, investing in equity and all that sort of thing.  Stuff like math and biology seem unimportant and dispensable to these authors compared to financial literacy. I think such articles stem from a combination of recency bias and selective amnesia!

Recency bias because they would have just woken up to the power of compounding, productive assets etc. and think they should have learnt it earlier.

Selective amnesia, because these guys seem to have forgotten that most kids hate school, because it is school, and most teachers find it hard enough to cover stuff that they have been doing for decades. Presenting concepts in an engaging if not novel manner  is a rarity in our education system (including the IITs etc.) and not the norm. So even if financial literacy was taken up in school, it would rapidly transform to ‘boring drivel’.

There is a time and place for everything. Including knowledge. When I wasted food, did not switch off the TV when I am not watching etc., my father would instruct me to and say, ‘when you earn, you will understand’. How true is that!

All this power of compounding, beating inflation drivel can wait.  The primary aspect of financial literacy a parent must teach a child is delay gratification.

Defined wrt to a child, it is the maturity to wait before making a purchase.

The maturity to recognise that even ‘wants’ must be researched.  We may want something badly, but is it the best? Can we get the same quality at a slightly lower price or can we get the same product from a different seller for a lower price?

Buy it we must, but after a bit  of research. The Earth is not going to end if we wait a day or two.

Even for purchases made due to peer pressure, ‘research’ would help  to ‘show-off’ better!

If a parent can instil this idea of researching products before purchasing it, the kid will learn purpose and patience.

I am fairly confident that such a kid will not grow to ask, ‘which is the best life insurance policy or mutual fund to buy?’ They would rather be researching for it themselves, than ask in forums.

Patience is the first and primary requirement for long-term investing.

Just because someone has been ‘duped’ into buying an insurance policy, does not mean we can teach about mis-selling in schools. All we can do is to try and eliminate mis-buying.

Other things that parents can do can be found here: How to get kids interested in money management


I write this post, feeling fortunate and thankful.  Yesterday my son completed age 5. I hate parties. So we have never had one for him. We do cut a cake in private.  If my son had asked for one, we would have had a party, but despite attending several of his friends parties, he does not want one – not that way anyway  (unfortunately he take after his dad in this aspect).

His idea of a birthday is not to go to school that day (request denied!). His idea of a birthday is to open gifts.  So we get him several (nothing expensive, no toys, just books and puzzles – he is a nerd) gifts.

This time, he wanted his age times 2 = 10 gifts. Thanks to flipkarts prompt service, they arrived a good two weeks ago.  I would have ripped apart the packages the moment they arrived. My son had the maturity to wait. He lined them up in a shelf and waited until today to open them.

Packing material is strewn all over my chair as I write this, fortunate and thankful that my son did not take after me.  He has intrinsic delay-gratification traits. He either got it from his moms side of the family or it is our sheer dumb luck.  Now our challenge is to nurture it.


Speaking of financial literacy, just learnt about an awesome educational initiative by the Centre for Investment Education and Learning Pvt Ltd (CIEL)  headed by Dr. Uma Shashikant (interview here). Dr. Shashikant is a well-known trainer and will speaking on direct equities at the Mumbai investor workshop on Feb 1st.


Extract from the about page:

Money Kraft aims to empower investors and intermediaries to make better personal finance decisions.The objective is to provide unbiased, simple, conceptually correct, practical and useful educational content. Moneykraft is not a producer or seller of financial products, nor does it undertake financial advisory or distributional services for a fee or commission.

Explore the site, register today, spread the word around.


Do share if you found this useful
Share your thoughts on this topic at the  Reddit freefincal_user_forum

Reach your financial goals like a pro! Join our 1600+ Facebook Group on Portfolio Management! You can now reduce fear, doubt and uncertainty while investing for your financial goals! Sign up for our lectures on goal-based portfolio management and join our exclusive Facebook Community. The 1st lecture is free!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!) or you buy the new Tactical Buy/Sell timing tool!
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. We operate in a non-profit manner. All revenue is used only for expenses and for the future growth of the site. Follow us on Google News Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any kind of paid articles, promotions or PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)
Free android apps