“Anybody who thinks money can’t buy happiness doesn’t know where to shop”?- Unknown
“Anybody who thinks money will make you happy, hasn’t got money.” ?- David Geffen
We humans are obsessed with money. To many people, it’s a commodity in and of itself. And it seems we’re gradually getting more obsessed. In the 1960s, 80% of US college students said it was essential to develop a meaningful philosophy of life, and 40% said it was essential to be very well off financially. By the mid-1990s, you could reverse those figures.
It seems like many people just want money. They don’t want to have made a product, provided a service or found some other way to offer value, and have their money reflect the value they have given. They want money as the end goal, not particularly caring how it was obtained.
Not all people are like that, of course, but a lot are. And it’s quite natural that they are, given what people think money can do for them. It’s the Holy Grail, isn’t it? You get freedom, security, status. But do you get happiness?
Yes! And no. It’s complicated.
Money can buy happiness if you don’t have it to start with, and it’s subject to the law of diminishing returns. It also depends how you spend it. I’ll explain in more detail.
If you live in poverty, it’s likely that many of your basic physical needs aren’t being met. You might not have an available food or water supply. You might have inadequate shelter, warmth or safety. In these situations, money absolutely will make you happier.
However, after a certain point, which is somewhere around $10-15k, money has a diminishing effect on happiness. Essentially, once you’re out of poverty and into the middle-class, extra money doesn’t buy much more happiness.
In 1985 the Forbes 100 wealthiest Americans, each with a net worth over $125m, had their happiness measured by psychologists, and their results turned out to be only slightly higher than the average for the country. Think about that; the top 100 wealthiest people, out of however-many-millions, were only a little happier than average.
However, when it comes to your bank balance, it’s not the size, but what you do with it that counts. Researchers have found that so-called ‘experiential purchases’, such as a meal out or theatre tickets, resulted in greater happiness than material purchases, like a big screen TV or new shoes. After a while we get used to these material possessions, even bored with them. If you spend £500 on a new TV, you’ll be happy for a while, but then you’ll adapt to it, and it will be the norm for you. When planned obsolescence brings the next technological advancement in television along, suddenly your TV is worse than the norm; it’s not good enough! On the other hand, you don’t adapt to an experience, and the more of them you have, the more ‘memory capital’ you build. Reminiscing on the good times makes people happier, and the more good times you’ve, had the more you have to reminisce on. This is not to mention the social bonds that you can develop through these experiences, which tend to be shared with friends or at least involve other people in some way.
Furthermore, if you use your money to perform acts of kindness for others, it can increase your own happiness, as well as the receiver of your gift. A researcher measured the happiness of a group of people, and then gave each of them some money, between $5-$20. Some were asked to spend it on themselves, while some were told to spend it on others. Then happiness was measured again, and it was the latter group who showed an increase.
So it seems how much money you earn isn’t as important as how you spend it. Perhaps the famous quote at the start of this article should read: “those who think money can’t buy happiness, don’t know who to shop for”.
Dey, E. L., Astin, A. W., & Korn, W. S. (1991). The American Freshman: Twenty-five year trends. Los Angeles: Higher Education Research Institute, University of California, Los Angeles.
Diener, E., Horwitz, J., & Emmons, R. A. (1985). Happiness of the very wealthy. Social Indicators, 16, 263-274.
Dunn, E.W., Aknin, L., & Norton, M. I. (2008). Spending money on others promotes happiness. Science, 319, 1687-1688