We’ve all dreamt about winning the lottery. We day dream about what we would buy with our winnings. While spending our winnings, basking in the glorious sunshine, on the beach of our own private island, we hear our parents and grandparents, telling us off with the age old saying; money doesn’t buy happiness! Snapping us right back to reality, questioning the validity of money can’t buy happiness, when in our fantasy world, we clearly seemed overjoyed to have won millions. Can this argument be settled for once and for all? Does money buy happiness or doesn’t it? Is the answer as clear cut as we think?
Money makes you happy! And stingier!
We already know that people in a comfortable standard of living (i.e. not having to worry too much about money, clothes, food etc.) are generally happier than those that are living in poverty. They may be happier, but research shows that they are also stingier. Professor Yaojun Li at the University of Manchester investigated differences in donations to charity between high income and low income earners in the United Kingdom. The findings revealed that the poorest 20% of the population donated 3.2% of their gross monthly income to charity compared to the richest 20% who only donate 0.9%. Those with a lower income were more generous compared to those with a higher income.
So, is it true that money doesn’t buy happiness? These findings don’t give a definitive answer, but we can clearly deduce that having more money doesn’t make you kinder, which some would argue is an essential part of being happy. This doesn’t mean that if you’re one of the people that has a comfortable living, to go and give half your salary to charity. Do what you can, try to set aside some money to donate to a shelter or food bank. Give it a try and tell us if it makes you feel better!
Money doesn’t buy happiness
We’ve all heard the saying “money doesn’t buy happiness”, but what does that actually mean? People often think that if they have all the money to buy the things they want, take their dream vacation, and live in their dream home, that they’ll finally be happy. However, money comes from working, and working enough to earn a high income is often associated with long work hours, and with little time to spend with loved ones and do social activities. This lack of time has can have a negative impact on social relationships, and with less time to spend the extra money, can actually make you more miserable. Researchers from the University of Rome investigated happiness in lottery winners. They found that considering their new found wealth, lottery winners were not much happier than than those that hadn’t won. As increased wealth is associated with increased pressure and responsibility, it could explain why the lottery winners don’t feel the instant happiness that everyone thinks they will feel if the “finally have the money to buy x“.
Sharing the wealth makes you happy
Researchers Dunn, Akin and Norton from the University of British Columbia conducted an experiment whereby participants received an envelope with money. One group were told to buy something nice for themselves. The other group were instructed to by something for someone else. The researchers found that the second group, who shared their money with someone else, reported increased feelings of happiness compared to the group who kept the money for themselves. These findings show that more money doesn’t necessarily mean more happiness. Happiness comes from being able to share this wealth with others, but money doesn’t buy happiness. Dunn, Akin and Norton conducted a similar experiment with young infants, swapping the money for crackers. They found that the infants displayed increased levels of happiness when they shared their crackers with another person. Based on these findings, it seems that from a young age, we are happier when we are able to share with others.
The money threshold to happiness
According to Di Tella and MacCulloh “Greater economic prosperity at some point ceases to buy more happiness.” There is a threshold, of how much money can actually bring you happiness, once you surpass this threshold, it no longer affects your happiness. Princeton University researchers Kahenman and Deaton identified the threshold, for money buying happiness to be $75,000. Once income surpassed found $75,000 per year, levels of reported happiness plateaued. Earning up the $75,000 mark is more money, more happiness, more than this, and it’s more money, more problems!
Age and gender play a part
Research has identified that the idea that money can buy happiness is influenced by a range of factors. They have identified that as we get older, we are less likely to hold the belief that money can buy happiness. Furthermore, there are gender differences, compared to men, women are less likely to believe that money holds the key to happiness.
Get more bang for your buck! (or more happiness)
Researchers Dunn, Gilbert and Wilson have found the relationship between money and happiness isn’t as strong as we may think. These researchers propose 8 principles, which they believe that regardless of income, can get more happiness for your money.
- Spend your money on experiences and not material goods. Researchers conducting a survey found 57% of respondents reported greater happiness for experience based purchases.
- Help others instead of yourself. The reasoning behind this is that we are social beings, so anything that can improve our social connections, ultimately invokes more positive feelings.
- Buy yourself more smaller treats instead of a few big treats. Here the old saying “it’s the little things” comes to mind.
- Do you really need the extended warranty? Buy less insurance. We have all buy expensive items and get drawn in by insurance offers, we think protects us against the inevitable, which often doesn’t happen. These policies are usually just as expensive!
- Do the opposite of buy now, pay later; pay now, use later. We are less like to be tempted by immediate reward and go for something of long term benefit. For example, you may choose a banana to eat for later than a chocolate bar to eat right away.
- Think about the details you’ve missed out. When imagining your dream house, or dream car, you only focus on the details which please you. Focusing on both the pro’s and con’s will help see the bigger picture, helping you to spend money for long term happiness.
- Be cautious when comparison shopping. Using comparison websites, may cause you to lose focus on the details and features that you need or make you happy. Instead you focus on features that help you to distinguish between items, such as price. You may go with the cheaper option, bag yourself a bargain, only later to realise it isn’t exactly what you were looking for.
- Follow the crowd. When looking to buy a wish list item, look at someone who has already purchased it. Do they seem as happy as you think you would be buying that bag or shoes? It’s like going to cinema and watching a movie based on a recommendation. If you think about it this way, you’ll figure out what’s really important and what you just want on a whim.
Money doesn’t happiness, right? It’s not a straightforward as it seems. Although it does split every one into two camps, yes and no, it is not that clear cut. Yes, money can make you happier, but it can make you stingier. On the other hand, increased income is associated with long working hours and less leisure time, having the opposite effect and potentially making you more miserable. More money only buys happiness when you share the wealth, and so much money can bring you happiness. A $75,000 salary to be precise. Any more than this, and happiness plateaus. Age and gender plays a part in how much we believe money is the key to happiness. Dunn, Gilbert and Wilson, outline 8 steps which can help you get more happiness for your money, without actually having to make more money. Also winning the lottery may not be the answer to all our problems, it may actually bring more problems of its own. Still there’s nothing wrong with having a plan on how to spend your winnings, just in case!
Where do you sit on this debate? Do you think money can buy happiness or do you think it is quite the opposite? Leave a comment below! 🙂
Becchetti, L., Trovato, G., & Londono Bedoya, D. A. (2011). Income, relational goods and happiness. Applied Economics, 43(3), 273-290.
Dunn, E. W., Aknin, L., & Norton, M. I. (2008). Spending money on others promotes happiness. Science, 319, 1687−1688.
Dunn, E., & Norton, M. (2012). Don’t indulge. Be happy. New York Times.
Dunn, E. W., Gilbert, D. T., & Wilson, T. D. (2011). If money doesn’t make you happy, then you probably aren’t spending it right. Journal of Consumer Psychology, 21(2), 115-125.
Kahneman, D., & Deaton, A. (2010). High income improves evaluation of life but not emotional well-being. Proceedings of the national academy of sciences, 107(38), 16489-16493.
Li, Y. (2013, April 3). Poor more generous than rich in recession, study shows. Retrieved from http://www.manchester.ac.uk/discover/news/poor-more-generous-than-rich-in-recession-study-shows
Tella, R. D., & MacCulloch, R. (2008). Happiness Adaptation to Income beyond” Basic Needs” (No. w14539). National Bureau of Economic Research.