When  I was in elementary school, teacher actively discouraged daydreaming. They refereed to it as a "lack of attention" and a "waste of time". As we got older, we kept these negative beliefs about daydreaming which may adversely impact our intelligence and overall mental well-being.

Thinkers from the past have often defined daydreaming as a gateway to unconscious processing. It is a way to engage your subconscious mind (or other than conscious mind) to tackle all kinds of problem through improved creativity. T.S. Eliot called it  "idea incubation" while Lewis Caroll called it "mental mastication".

Then in the 50's, Jerome L Singer, a Yale psychologist,  put daydreaming through the scientific ringer and published his findings in 1975 in a book entitled "The Inner World of Daydreaming". Singer defined 3 categories of daydreaming:

1. Positive Constructive Daydreaming - this is a positive constraint free model in which you experience playful, vivid imagery that encourages creative thought
2. Guilty Dysphoric Daydreaming - This is a type veterans with PTSD sometimes experience which is driven by ambition, anguish and pain. It allows the dreamer to experience heroism, pain or relive a past trauma.
3. Poor Attentional Control Daydreaming - Typically this is driven by distraction when people have difficulty concentrating. Sometime this is caused by Attention Deficit Disorder or identified as such.

Rebecca McMillan and Scott Kaufman wrote a paper entitled "Ode to Positive Constructive Daydreaming" (link) which talks about the benefits of the first style of daydreaming. They explain how it is not only beneficial but essential to making people happy, creative and empowered.

An interesting excerpt from the paper says

"Future planning which is increased by a period of self-reflection and attenuated by an unhappy mood; creativity, especially creative incubation and problem solving; attentional cycling which allows individuals to rotate through different information streams to advance personally meaningful and external goals; and dishabituation which enhances learning by providing short breaks from external tasks, thereby achieving distributed rather than massed practice"

They continue in the same thought direction

"These mental activities are, in fact, central to the task of meaning making, of developing and maintaining an understanding of oneself in the world"

Another study published in Psychological Science (link) from researcher from the University of Wisconsin and the Max Planck Institute for Human Cognitive and Brain Science posits that daydreaming (or sometime called mind wandering) " correlates with higher degrees of what is referred to as working memory". This is the type of memory with the ability to retain and recall information when actively distracted.

Daydreaming isn't free because it requires time and it requires that you give yourself permission to daydream (which isn't as easy as it sounds). You have to be able to daydream without feeling guilty for wasting time. Once you are able to daydream freely, you will start seeing huge benefits. It may be as simple as a mental vacation during a stressful day, daydreaming about an upcoming presentation you have (aka mental preparation), to dynamically work through complicated unrelated information or a freestyle session which bolsters memory and creativity.

"Encourage your kids to daydream. Encourage your employees to take time out of their day to daydream. Encourage yourself to daydream." -Edward N Kiledjian