The New Science Behind Your Spending Addiction

Like many colleges, Washington University in St. Louis offers children of its faculty free tuition. So Leonard Green, a professor of psychology there, did all he could to persuade his daughter to choose the school. He extolled its academic offerings, praised its social atmosphere, talked up its extracurricular activities—and promised that if Hannah chose Washington he would give her $20,000 each undergraduate year, plus $20,000 at graduation, for a nest egg totaling $100,000.

She went to New York University.

To many, this might seem like a simple case of shortsightedness, a decision based on today's wants (an exciting city, independence) versus tomorrow's needs (money, shelter). Indeed, the choice to spend rather than save reflects a very human—and, some would say, American—quirk: a preference for immediate gratification over future gains. In other words, we get far more joy from buying a new pair of shoes today, or a Caribbean vacation, or an iPhone 4S, than from imagining a comfortable life tomorrow. Throw in an instant-access culture—in which we can get answers on the Internet within seconds, have a coffeepot delivered to our door overnight, and watch movies on demand—and we're not exactly training the next generation to delay gratification.

"Pleasure now is worth more to us than pleasure later," says economist William Dickens of Northeastern University. "We much prefer current consumption to future consumption. It may even be wired into us."

As brain scientists plumb the neurology of an afternoon at the mall, they are discovering measurable differences between the brains of people who save and those who spend with abandon, particularly in areas of the brain that predict consequences, process the sense of reward, spur motivation, and control memory.

In fact, neuroscientists are mapping the brain's saving and spending circuits so precisely that they have been able to rev up the saving and disable the spending in some people (in the lab, alas; not at the cash register). The result: people's preferences switch from spending like a drunken sailor to saving like a child of the Depression. All told, the gray matter responsible for some of our most crucial decisions is finally revealing its secrets. Call it the "moneybrain."

Psychologists and behavioral economists, meanwhile, are identifying the personality types and other traits that distinguish savers from spenders, showing that people who aren't good savers are neither stupid nor irrational—but often simply don't accurately foresee the consequences of not saving. Rewire the brain to find pleasure in future rewards, and you're on the path to a future you really want.

In one experiment, neuroeconomist Paul Glimcher of New York University wanted to see what it would take for people to willingly delay gratification. He gave a dozen volunteers a choice: $20 now or more money, from $20.25 to $110, later. On one end of the spectrum was the person who agreed to take $21 in a month—to essentially wait a month in order to gain just $1. In economics-speak, this kind of person has a "flat discount function," meaning he values tomorrow almost as much as today and is therefore able to delay gratification. At the other end was someone who was willing to wait a month only if he got $68, a premium of $48 from the original offer. This is someone economists call a "steep discounter," meaning the value he puts on the future (and having money then) is dramatically less than the value he places on today; when he wants something, he wants it now. The $21 person was, tellingly, an M.D.-Ph.D. student. "If you're willing to go to grad school for eight years, you're really willing to delay gratification," says Glimcher.

More revealing was the reason for the differences. To measure brain activity while people considered whether to delay gratification, researchers slid their subjects into functional magnetic resonance imaging (fMRI) machines. The scientists found that activity in two regions—the ventral striatum, tucked deep in the brain, and the medial prefrontal cortex (PFC) right behind the forehead—closely tracked people's preferences. In someone who was offered a choice between $100 today or $100 next week, activity in these regions plunged when the next-week choice was considered, and fell even more as the payoff was postponed further and further into the future. These are spend-it-now, to-hell-with-tomorrow people who seek immediate gratification. In other people, however, activity in the ventral striatum and medial prefrontal cortex activity was the same whether they were thinking of having money today or down the road—indicating that they were just as happy either way.

For anyone who wants to save more but can't seem to do so, that raises the obvious question: how can I make my ventral striatum and medial prefrontal cortex as happy about rewards in the future as they are about rewards today?

It's something that scientists are actively studying. In one classic study from the late 1960s, fondly known as the marshmallow experiment, scientists at Stanford University led by psychologist Walter Mischel (now at Columbia University) offered 4-year-olds a marshmallow, and left it invitingly in front of them. The hitch: if the kids waited to eat the marshmallow until the experimenter, who stepped out of the room, returned in a few minutes, they could have two marshmallows. More than a decade later, the children who waited and got the second marshmallow scored much higher on the SAT, supporting the idea that impulse control and other aspects of "emotional intelligence" are linked to academic performance. The reward delayers were also less likely to be obese, to have become addicted to illegal drugs, and to be divorced—outcomes that are more likely in people who go for immediate gratification.

The marshmallow children were tested every dozen years or so, says Mischel, and are now in their 40s. In a study reported in August in the Proceedings of the National Academy of Sciences, scientists led by psychobiologist B. J. Casey of Weill Cornell Medical College gathered 59 of the original kids and gave them an adult version of the delayed-gratification test. Using fMRI, they analyzed differences in brain activity between those who were good at delaying gratification and those who opted for instant rewards, marshmallows or otherwise. In high delayers, the brain's thoughtful, rational prefrontal cortex was more active, as was the right inferior frontal gyrus, which inhibits the "I want it now" impulse. Poor delayers had less activity in both regions, but higher activity in regions of the limbic system that respond to instant gratification. Identifying the regions of the brain that control such impulses is a first step in learning how to strengthen them and, ultimately, to enjoy saving.

Other studies, too, have shown the key role the prefrontal cortex plays in making us willing to defer gratification today in favor of saving for retirement. The dorsolateral PFC, in particular, sends "calm down" signals to the midbrain's "I want it now" circuits. As a result, in studies that use strong magnets to temporarily disable the dorsolateral PFC on human volunteers, "people get more impulsive," says NYU's Glimcher. That is, they strongly prefer immediate gratification. "But if you artificially activate it," he says, people become perfectly content to save for tomorrow.

The noninvasive "zapping" technology, called transcranial magnetic stimulation (TMS), is currently being studied at Columbia University and NYU, among other places. The technology works by inducing a weak electric current in targeted regions of the brain. In the lab, that allows scientists to pinpoint regions of people's brains responsible for specific functions. In other words, if zapping an area disables that area, then anything the person can no longer do is presumably controlled by that spot.

So far, none of the researchers using TMS to map the brain have wheeled the device to a shopping mall and aimed it at people who buy $300 sunglasses and $150 T-shirts despite having contributed $0 to their savings, but the notion isn't preposterous. TMS has been successfully used to treat chronic pain, major depression, tinnitus, and some symptoms of schizophrenia, in each case by revving up or shutting down activity in specific brain circuits that underlie the condition.

Since zapping your brain to rev up the dorsolateral PFC is not ready for primetime, scientists have begun searching for more practical ways to develop a moneybrain that has a talent for saving. One hint comes from the discovery that the size of the dorsolateral PFC differs from one person to another, notes neuroeconomist Paul Zak of Claremont Graduate University, as does the number and strength of its connections to the midbrain's circuits. Everything that's been discovered about the plasticity of the adult brain suggests that it should be possible to increase the number or strength of these connections so that the midbrain receives more calming signals.

Research has also shown that having a good short-term (or "working") memory is associated with being able to project yourself into the future and plan for it, which is a prerequisite of saving. That's partly because achieving a goal requires keeping it in mind. Brain scans back this up: the dorsolateral PFC is responsible for both. In one recent study, psychologist Warren Bickel of Virginia Tech put people through training exercises that improved their memory, and found they also developed "longer time horizons," meaning they valued the future more. "We're only at the beginning of figuring out how to change people's temporal horizons," says Bickel. "But the preliminary data are encouraging."

That seems to be what some of those original marshmallow-experiment children accomplished. Although the kids who remained in the same category—good at delaying gratification as toddlers as well as adults, or bad at both ages—have received the lion's share of the media attention, Mischel points out that many of the kids who gobbled up the marshmallow at the age of 4 learned to resist the lure of immediate gratification by the time they were young adults. "Being unable to delay gratification is not something we're stuck with for life," says Mischel. And a public that is infatuated with brain scans should know that just because a brain behaves in a particular way does not mean that it is hard-wired to do so.

To the contrary: even children can train their brains to recognize that forgoing pleasure now can bring a greater payoff later, says Claremont's Zak: doing homework tonight can bring good grades next month; saving a small allowance to buy one nice thing later rather than cheap junk every week. "You develop willpower and patience through practice," he says. "If you defer gratification, the payoff can be greater than with immediate gratification," says Zak, "but your brain has to learn that." He also finds that a squirt of the hormone oxytocin—known as the "love hormone" because of the role it plays in pair bonding and maternal behavior—makes people more patient: when people with a shot of the hormone are offered $10 now or $12 later, they are willing to wait 43 percent longer for that "later" to arrive (14 days rather than 10, for instance). "This tells us that people who are happier and have greater social support save more," says Zak. "Oxytocin reduces anxiety, so we can make decisions that are better for us." Not that we should be shooting ourselves up—but the research does suggest that any way we can reduce anxiety might also help us save for a rainy day.

This is good news for a generation of young people whose odds appear to be stacked against them. Research shows this group typically isn't willing to delay gratification, in part because they tend to be more impulsive and less patient, but also because they think they have plenty of time to save when they're older. "A college student who expects to graduate and obtain a high-paying job, or a young professional who expects to gain significant annual raises, will be apt not to save because they expect to be able to make up for lost time by saving more later," says economist Antony Davies of Duquesne University. "Another factor is inexperience. Young people are inexperienced at being old. A 22-year-old will perceive 20 years as an eternity. To ask this person to save for retirement is like asking the person to give his money to someone else: he cannot picture himself as a retiree."

Economists are waiting to see how the entitled, indulged children of helicopter parents will behave. On the one hand, many of them have been showered with every conceivable largesse, from private music lessons and pricey soccer camps to the SAT tutoring that got them into a top college. For many of those raised in two-career households, "no" was a word they seldom heard from their parents, so eager were Mom and Dad to compensate for their lack of quantity time by providing quality time—and experiences and stuff—instead. Even if they are inclined to save, they're facing real obstacles: many emerged from college with significantly more student-loan debt than those who came before them and are entering a job market getting weaker by the month.

Science has yet to identify whether the brains of the Twitter generation are any different from the rest of ours, but today's culture of one-click shopping and instant messaging doesn't merely satisfy our desire for instant gratification, it encourages it. "If you grow up in an environment marked by such short time horizons, of course you're going to satisfy your desires as quickly as you can," says Virginia Tech's Bickel. "Unless you're trained to control your impulses, why would you? Instant gratification is fun, and that's what today's technology is teaching us." What life teaches us, however, is another matter. Five years after she graduated, Hannah Green admits that, although she loved NYU, maybe she should have accepted that $100,000 from her father instead.