Happy Financial Independence Day!

Welcome to the 69th edition of Your Weekly Aura, a newsletter featuring must-read money and mindfulness tips and tricks from Courtney & Kelsey. This week we’re talking about the privilege of having a choice and the (multiple) paths to financial freedom. If you like this newsletter, please share it with your friends and subscribe below.

Free to choose.

Happy post-Independence Day to our friends in the U.S.

Today, we’re talking about self-deprivation and success. Checking up on the tots who successfully deprived themselves of sweets in the 1970s (where are they now?) and understanding how our environments impact our ability to trust in ourselves and our systems. So, let’s get to it.

The Marshmallow Experiment

The famous 1972 “marshmallow experiment” measured the impact of self-restraint on children’s future success. More than 600 children between the ages of four to six were put in an empty room and told they could eat one marshmallow now or wait 15 minutes and get a second marshmallow.

In an attempt to distract themselves, these Palo Alto tots started kicking the table, covering their eyes, even pulling their own hair, but in the end just one-third of the kids were able to wait the full 15 minutes.

After decades of following these kids, researchers found that the children who were able to delay gratification “tended to exhibit higher levels of self-control and were associated with better life outcomes such as improved academic performance and social skills.”

And this was the norm in psychology circles for decades, until now.

The Marshmallow Trust Test

In 2012, Dr. Celeste Kidd was working in a shelter for unhoused children when she saw a young girl unwrap a lollipop. Just before she put it in her mouth, it was snatched away by another child. When she didn’t cry, or flinch, Kidd was puzzled.

She organized an updated version of the marshmallow experiment.

Kidd divided the child subjects into two groups - reliable and unreliable.

In the “unreliable” group, the children were given bad art supplies and told that if they waited, they could get better materials. 2.5 minutes later the researcher would return without anything, apologize, and tell the child they made a mistake and they didn’t have any extra art supplies. In the “reliable” group, the researchers returned with the promised, better art supplies.

Then, both groups took the original marshmallow experiment.

The researchers were surprised when the kids from the “unreliable” group waited just 3 minutes and 2 seconds before eating the marshmallow. The kids in the “reliable” group who trusted the researcher held out for 12 minutes and two seconds. Just one kid in the unreliable group waited the entire 15 mins v. 9 kids in the reliable group who didn’t snack the entire time.

So what?

As it turns out, your environment plays a pretty big role in your ability to practice self-control and delay gratification. It’s also about the stability of your environment. If you are promised better art supplies, and you get it, it’s easier to believe that the second marshmallow will appear after 15 minutes.

It’s easier to trust the system.

On the other hand, if you’re promised better art supplies and no supplies come, why would you trust the promise of a second marshmallow? Fool me once, shame on you, fool me twice… I’m eating the f*ing marshmallow.

Many of us were born to Boomer and GenX parents in a reliable economic environment. We were told that if we worked hard we could do what we loved and afford to live like our parents.

But we came of age in an unreliable environment marked by two recessions, record-high inflation, and stagnant wages. Owning your own home has become an American pipe dream, with millions more Americans looking for help getting out of debt and back to a net worth of Zero.

Talking to our parents (and their wealth advisors) about money is like talking to Palo Alto babies who are used to getting what they were promised. They kicked the table, pulled their hair, and covered their eyes, forcing themselves to be patient. Because patience was the key to realizing the gains from home ownership, corporate pensions, and social security benefits. Patience was the key to getting a second marshmallow realizing investment returns that they were pretty sure were going to come.

But when you grow up in a volatile environment where nothing is guaranteed, where you feel like you lose more often than you win, and the happiest 142 days of your life started with the cinematic release of Shrek and ended on September 11th, 2001, you might be more inclined to hoard what you have or spend it as it comes because your future is uncertain.

But it doesn’t have to be this way. You can’t solve systemic racism and sexism and you can’t wave a magic wand and come of age in the economic boom of the 90s. But you can choose to believe in, and invest for a better future for yourself.

The system wasn’t built for me. Aura was built with me in mind.

I’ll never be able to afford a house. If I invest ~$60 a week, in 35 years, I’ll have $1M+.

The people in charge don’t care about me. I can join a community of sustainable investors to invest for a better future, together.

You can survive in scarcity, or you can learn to thrive in abundance – the choice is yours.

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For Your Aura

Want to learn more about your money story and discover your Aura? Take our quiz to find out your money personality today.

The Star: Your brain on shopping: the psychology of fast-fashion.

The Empath: The Boomer Buffer: why the U.S. economy likely won’t crash in a recession.

The Thinker: 3 money management tips from the original Marshmallow Experiment.

The Activist: Financial psychology and how to avoid losing.

Ask the Expert

What does the Fed actually do?

The Federal Reserve is like a “bank for banks” in the United States.

It has a few important jobs:

1. Controlling money: The Fed controls the amount of money that's available in the country. It can make more money available or take it out of circulation. Think of it like the Fed has a magic money machine. When they make more money, it can help the economy grow. When they take money out, it can help slow down spending.

2. Setting interest rates: Interest rates are the extra money people and businesses have to pay when they borrow money. The Fed can raise or lower interest rates, which affects how much it costs to borrow money. When the Fed lowers interest rates, it encourages borrowing and spending, stimulating the economy. Conversely, when the Fed raises interest rates, borrowing becomes more expensive, which can help prevent the economy from overheating and control inflation.

3. Watching over banks: The Fed keeps an eye on banks to make sure they are doing things right and not taking unnecessary risks. It wants to make sure banks are stable and not going to fail. That protects our money and keeps the banking system strong. Last month, the largest banks in the U.S. all passed the Fed’s stress test showing that they are able to weather a recession.

4. Helping with payments: The Fed helps make sure that payments between banks and other financial institutions happen smoothly. When we pay bills or make purchases with our debit or credit cards, the Fed helps make sure the money gets moved securely between all the different banks and companies involved. (Bonus: this is called “fiat” currency as opposed to “cryptocurrency”)

5. Being a backup for banks: If banks are having a tough time and need extra money to keep going, the Fed can lend them money. It's like being a “lender of last resort” to make sure banks don’t collapse and cause bigger problems for the whole economy (i.e. 2008 Global Financial Crisis)

6. Researching and informing: The Fed keeps an eye on the economy and does research to understand how it's doing. They collect a lot of data and analyze it to figure out things like how many people have jobs, how much businesses are growing, and if prices are going up or down. This helps them make decisions about how to keep the economy stable and healthy.

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