Myth busters

What you should know about common money myths

Some money myths persist even when the conclusions may not be accurate or applicable. Financial columnist Liz Weston busts a few for readers:

1 Experiences vs. happiness

There’s a widely held belief that people get more happiness from spending on experiences than buying material things. However, it appears that this is not universal for all income levels.

Wendy Wood, professor of psychology and business at the University of Southern California, and two of her graduate students examined 23 studies and conducted three of their own focusing on socioeconomic background. Their findings showed that people with less education and income were happier after purchasing material goods or were equally happy about how they spent their money, whether on things or experiences.

“If you have a restricted budget and you can only spend a small amount of money, then each purchase has to be really worthwhile,” Wood said.

2 Marshmallow test

In the famous “marshmallow test” researchers put a treat in front of preschoolers and tell them if they don’t eat it, they’ll get two treats after 15 minutes. Researchers found that preschoolers’ ability to put off eating the marshmallow correlated with academic performance and better stress management when they were older.

A study published earlier this year found a much smaller correlation between delayed marshmallow consumption and future success — and most of that was explained by a child’s background.

“It’s easier to delay gratification if your basic needs are met and if you have financial security,” said said Tyler Watts, assistant professor of research at New York University.

3 Willpower is limited

Researchers have long insisted that our self-control is a limited resource that can be exhausted, a process known as “ego depletion.”

So rather than relying on self-control when it comes to money, financial advisers tell us to put our saving and investing on automatic so we have fewer choices to make (and potentially screw up).

But researchers from the University of Miami and the University of Minnesota who reviewed more than 100 published and unpublished studies found little support for the idea that willpower is a finite resource and even some evidence that self-control improves with use.