Spending for smiles: can money buy happiness?
Money can’t buy happiness - or so the cliché goes. However, this research from Harvard University will concur - it reveals that while individuals with more money are slightly happier than those that have less, the true key to happiness lies in how you spend your money.
A study by Cambridge University makes a similar point, but goes a further to say that money can buy happiness when the spending fits our personality. Sure, most of us are familiar with that rush that comes with buying material possessions. However, Dr Thomas Gilovich, a psychology professor at Cornell University who has been studying the question of money and happiness for over two decades, points out that such a rush is short-lived. To achieve longer-term happiness, you should spend money on experiences rather than things.
So, we can conclude that money can indeed buy happiness if the spending corresponds to one’s personality, is prosocial and focused on experiences rather than material possessions.
What is prosocial spending?
In search for the correlation between prosocial spending and happiness, Professor Dunn of Harvard conducted an experiment. Dr Dunn gave away $5 and $20 dollar bills to students accompanied by two different sets of instructions. Some students were told to spend the money on themselves, whilst others were told to spend on someone else. The level of happiness reported at the end of the study indicates that those who spent money on others felt happier than those who treated themselves.
And such is the crux of prosocial spending - money spent on others promotes happiness. This phenomenon has even been observed in adults as well as in toddlers.
Typically, prosocial spending includes:
- Donating to charity: research shows you may experience a happiness boost from the act of giving to charity. There are plenty of worthy causes to pick from.
- Gifting to friends and family: giving to loved ones feels particularly rewarding.
- Investing in social impact projects: if you want to make a more significant contribution, you can explore investing into a social impact startup.
Experiences vs. things
When you spend money on experiences, you create memories. Not only will you enjoy those travels in the fabulous Cape Town, but the memories you make on your journey will stay with you forever. Quality times spent with your loved ones is something you will look back on in your old age.
Despite all that, Prof. Howell, associate professor of psychology at San Francisco State University, makes the point that even though we know that buying life experiences will make us happier in the long-run, we continue to spend money on material items because we think they are better value. People seem to feel like they get no economic value from life experiences; we associate economic value with “stuff”. However, happiness isn’t just one fleeting moment of satisfaction - it is something that needs to be measured over time, and experiences undoubtedly do a far better job at creating long-term happiness.
A moment of self-reflection
Write down all your big purchases over the past year (this includes flights, hotels, it bags, furniture, cars etc.). Now, take a look at your list and rate each item on a scale of “how much long-term happiness did it give me” out of 10. Notice anything peculiar?
Credit Photo: Unsplash - Fernando Brasil