Can you teach an old dog new tricks?

A week ago, I was working in my yard with Mocha (our chocolate lab) outside with me.  Mocha understands when I’m in work mode, so she sniffs her way around the yard, staying out of my way and looking for who-knows-what.   After about an hour of good hard labor, I turned around to find Mocha walking out of our woods with a dirty bone in her mouth and a grin from floppy ear to floppy ear.  This was a proud moment, both for my dog and for her owner.  The bone she had her in mouth was far larger than anything we’ve been giving her recently.  It dawned on me that she had unearthed a bone she had buried from last year, or perhaps the year before that.

I laughed out loud realizing that my dog had figured out the benefits of deferred gratification.  Here was a dog who was reliant on an absentminded human to feed her twice a day, yet she was willing to forego the pleasure of eating one tasty bone today, with the promise of eating it in the future, assuming she could sniff it out of the yard.

Deferring gratification is one of the core tenets of successful financial planning.  If you spend less than you earn, you will end up with savings. With those savings come accumulated assets over the years.  At the core of this process is your willingness to forego some form of pleasure today for security and pleasure in the future.  While this is a simple concept, it’s hard to implement in our consumer driven society which values shiny things over financial prudence.

Although my dog had figured out the hard part of financial planning, which is deferring gratification, she still needed help.  I sat her down and explained the benefits of compound interest and tax sensitive investing.  She was very attentive, although it may have helped that I had a tennis ball in my hand.  Remember, she’s a retriever and there’s nothing that can keep her attention better than a yellow Dunlop. I’ll be opening a Roth IRA for my dog and depositing all her saved bones.  She may prefer an investment in Purina, but I’m going to stick with low cost diversified index funds.

Although this is a cute story, it didn’t end with my dog eating her bone.  Shortly after unearthing the bone, she returned it to her hiding spot, choosing to further her deferral.  I guess she understands compound interest after all.