Does money buy happiness? While lavish gifts, luxury clothes, beach vacations and massive mansions can give the illusion of happiness, it’s often bought by everyday experiences. Even though money doesn’t give you guaranteed, pure happiness, research shows it improves your everyday life.
In a study done by Harvard Business School, 522 people kept a diary for 30 days, tracking daily events and their emotional response to them. Participants’ incomes ranged from less than $10,000 to $150,000 or more. Here’s what they found: money reduces intense stress, and more money brings greater control. In short: higher income leads to higher satisfaction.
“It’s not that rich people don’t have problems,” Harvard Business School professor Jon Jachimowicz says, “but having money allows you to fix problems and resolve them more quickly.”
Money reduced intense stress in participants’ entries; it showed there were no significant differences in the number of hard times the participants experienced based on their income; participants across all different incomes recorded similar numbers of daily stressors. However, participants with higher income showed that these stressors affected them less in a negative way. This showed that more money brought a greater sense of control, as higher income participants reported that they felt they had more control over negative events in their lives. Lastly, higher income led to greater satisfaction, with participants who earned more money showing higher levels of overall happiness and being less negative in everyday life.
Adding on to this idea, recent research has challenged the belief that happiness stops increasing once someone earns $75,000 a year. A widely known 2010 study by Daniel Kahneman and Angus Deaton found that while overall life happiness continued to rise with income, everyday happiness tended to plateau once participants annual earnings reached around $75,000. This early finding became highly influential and shaped public opinion as well as created debates about income and well being.
However, new work economists including Matthew Killingsworth, Kahneman and Barbara Mellers showed that for most people, happiness continues to increase with income well beyond the initial 75,000, in fact, it’s all the way up to around 500,000 a year in the data analyzed. In this research, they surveyed more than 33,000 U.S. adults about their happiness and overall quality of life. They found that bigger incomes are generally associated with greater happiness across the income board, though there is a small group of people who still remain unhappy despite higher earrings. These more recent findings show that rather than a very strict “happiness cap”, the strong correlation between money and happiness is more complex.
A good question to ask when looking at this information is why the income level for reaching a happiness plateau changed so dramatically from $75,000 to $500,000. This shift could be caused by factors like inflation, a more consumer driven economy, or increasing wealth inequality. Since these studies were made 13 years apart, a lot changed during that time. Even though the “happiness cap” increased, the studies still show the same trend, higher income is associated with greater happiness.
Overall, these findings show that the relationship between money and happiness has remained consistent over time, even as economic conditions have changed. While the exact amount of income linked to higher happiness may shift, the general idea stays the same. Having more financial resources can improve quality of life and reduce stress. This says that money alone does not guarantee happiness, but it can significantly contribute to it.
