Delay Gratification – the key to financial literacy

Published: January 27, 2015 at 9:22 am

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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.

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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.


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About the Author M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the author and owner of  He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Pattu” as he is popularly known, 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. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates  and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)
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