I’ve never liked the question “Can money buy happiness?”
First, money itself is the #1 source of stress for people across all income levels in the US. Even when people have plenty of money, it still brings them stress.
Second, “happiness” is a squishy word with many meanings.
Still, I’ve been thinking about money and happiness because my kids are getting old enough to think about their careers and earning potential. And what they earn may play a significant role in their long-term emotional well-being (i.e., happiness).
Life is about trade-offs. Money is often a deciding factor in choose a career, project, or passion. “Should I do it for love or money?”
Understanding how money might or might not make you happy can help you make more informed life decisions.
So here’s what the latest research – and the world’s longest happiness study – can tell us about money and happiness.
Money can make it easier to reduce stress
It seems obvious, but research backs this up. For example, research by Jon Jachimowicz at Harvard Business School finds money can buy a life with less stress. This research also finds:
- Income level doesn’t affect the frequency of distressing events, but those with higher incomes experience less intense negativity from such events.
- Higher income provides more control over negative events, reducing stress and increasing the ability to handle daily hassles.
- Individuals with higher incomes generally report greater life satisfaction.
“If we only focus on the happiness money can bring, I think we are missing something. We also need to think about all of the worries that it can free us from.”– Jon Jachimowicz, assistant professor of business administration in the Organizational Behavior Unit at HBS
A higher income usually leads to greater happiness
The most influential study about income and happiness found money could only boost happiness up to a point — about $75,000 in annual earnings. Beyond that, money had little impact.
However, that study is now obsolete. An updated and expanded methodology now finds “for most people larger incomes are associated with greater happiness.”
The lead author of the study notes the only exceptions are “people who are financially well-off but unhappy. For instance, if you’re rich and miserable, more money won’t help.”
For these least happy people, happiness rises with income until $100,000, then stops. For those in the middle range of emotional well-being, happiness increases linearly with income, and for the happiest group the association actually accelerates above $100,000 – all the way to $500,000.
But relationships, not money, are the greatest contributors to a happy life
The Harvard Study of Adult Development has been running for over 85 years. Indeed, it’s the longest-running scientific study of happiness.
According to this study, high levels of wealth, success, and fame were not the most important contributors to happiness.
Instead, quality relationships were the single biggest factor for a happy life.
The study also found that people who are more socially connected are happier, physically healthier, and live longer than people who are less connected.
Money + relationships = joy?
One slightly unexpected way money can bring us happiness – even joy – is spending on other people. This can take the form of charity or simply being generous with those we love.
A huge study of over 200,000 respondents around the world revealed being generous has a significant positive effect on one’s happiness. And Notre Dame researchers found the more generous people were, the happier they reported feeling.
For me personally, “money buys happiness” when I can spend it on my family. Not only spending on my family to provide the things they need, but also spending with my family, on experiences we share and cherish forever.
At Tiller, our core value is “money matters because life matters more” – and for many, happiness is the goal in life.
And going back to the Harvard study above, for enduring happiness, relationships matter most.