Can Money Buy Happiness?
Money can’t buy happiness. This is a saying that gets thrown around in society a fair bit and one that seems to have people split on either side. While some people believe that there are factors much larger than money that should impact upon emotional wellbeing … others recognise the significance of money in living a fulfilling life in accordance with their needs and desires. So what’s the truth? Can money buy happiness or not?
Money does appear to impact happiness, but it’s not necessarily the case that the more you have, the happier you’ll be. A recent study using a sample of over 1.7 million individuals from 164 countries aimed to examine whether there was a sweet spot in terms of income satiation – in other words, is there a point at which receiving a higher income no longer increases happiness?
It was found that for optimal emotional wellbeing, individual annual income sits at around USD $60,000 to $75,000 (approximately AUD $84,000 to $105,000). Earning anything above this figure did not appear to have a direct impact on day to day happiness and positive emotions. However, in terms of overall life evaluation, which takes into account other factors such as long term goals and peer comparisons, a higher figure of USD $95,000 (approximately AUD $132,000) was found.
Nevertheless, it is also important to remember that this may vary depending on country of residence or circumstance. They also observed that in some cases there is actually a decline in emotional wellbeing after the $95,000 mark, perhaps in part due to unrealistic social comparisons or unfulfilling superficial desires. This doesn’t necessarily mean that getting a new job with a huge pay increase or winning the lottery won’t result in feeling positive emotions, rather that a person earning $200,000 a year isn’t likely to be much happier overall than someone making $95,000.
Many people believe that the association between money and happiness is largely due to the ability to obtain materialistic possessions … but it looks like this might not be the case after all. People who are more ‘materialistic’ tend to report lower levels of life satisfaction when compared to those who aren’t. This may be in part due to people spending excessive amounts of money on materialistic goods as a sort of coping mechanism for managing feelings of anxiety or insecurity or as a strategy to avoid self-awareness.
Many materialists also reported having fewer close relationships and rated themselves less favourably, which may be in part due to a reliance on materialistic goods as opposed to social connectedness to fulfil emotional needs. However this is not to say that spending money does not result in happiness; there are ways in which spending money can make you substantially happier that is, if you know how to spend it in the right way.In contrast to spending money on possessions, spending money on experiences has been shown to increase positive emotions and happiness. We also tend to be happier when thinking about life experiences, we rate them as contributing more to happiness and consider them to be a better use of money.
There are a few reasons for this. Firstly, life experiences satisfy our need for relatedness and increase feelings of vitality which in turn leads to greater happiness, particularly when these experiences are with others. Secondly, life experiences do not promote the same types of social comparisons as the purchase of material items do. This may be because they are valued primarily for more intrinsic rather than extrinsic reasons.
In an experiment, participants were given either $5 or $20 and were instructed to spend the money either on themselves or on others and then had their happiness assessed. While most people when initially asked to predict what would make them happier, said that spending $20 on themselves would make them happiest this is not what the research found. Instead, this study found that those who spent their money on others were happier than those who spent it on themselves, regardless of the amount. Although these participants received nothing tangible themselves from this act, they still reported significantly more positive emotions than if they had.
So can money buy happiness?Yes, it can but only to a certain extent and if spent in distinct ways. While happiness does appear to be somewhat dependent on income this only applies up until a certain point rather than being a totally linear relationship. This is not to say that if your income isn’t at this level that you will not be able to reach optimal happiness in life – rather that more money does not necessarily mean more happiness.
Furthermore, we appear to be happier when we spend our money on experiences or on others rather than on materialistic possessions. This is also not to imply that you shouldn’t spend your money on materialistic goods or that buying a new phone or laptop won’t bring you any happiness. However it may be the case that spending a substantial amount of money this way may not bring you the same sense of fulfilment.