Does having more money make you happier in life?
Money can absolutely buy happiness.
Chronic poverty not only prevents access to the basic necessities of life for at least one in eight Americans—money to buy food would unquestionably make a starving person happier—but it also has measurable adverse psychological effects. The cognitive consequence of constant anxiety about money has been compared to a 13-point drop in IQ or losing a full night of sleep. Poverty also makes people less likely to take risks and less adept at long-term planning. It exposes those whom it affects to depression, anxiety, PTSD, suicide, violence, crime, and addiction. The (in)famous marshmallow experiment, which for decades spoke to children's ability to delay gratification as correlating with later financial success, actually proved the opposite: children from wealthier households take later gratification for granted and also benefit from their parents' wealth later in life.
Compared to the chronically impoverished, the rich have better access to education, healthcare, childcare, therapy, and recreation. In other words, status, health, and free time are commodities, just like everything else in a capitalist economy. Happiness depends on one's relative situation to others, and every signifier of status in our society can be bought and sold.
Of course, just like anyone else, some rich people are still miserable for various reasons. Yet, by having their basic needs met and having a cushion of security in life, as well as access to greater health and recreation--they certainly don't suffer as much as those less well-off.
Princeton researcher Daniel Kahneman, Ph.D., shared the 2002 Nobel Prize for applying psychology principles to economics. His study revealed that it's just an illusion that wealth brings happiness, as increases to an individual's income only have a short-term effect on overall life satisfaction. In layman's terms, getting a raise may make you happy, but only for a brief period, after which things will go back to normal.
The study also showed that when a country's income increased, it did not directly correlate to an increase in its citizens' life satisfaction.
Researchers and psychologists from Purdue University and the University of Virginia discovered that the 'ideal income' to live a satisfying life is around $95,000 a year--while earning $60,000 to $75,000 correlated with emotional wellbeing.
However, one of the most interesting behavioral economics findings suggests that you will only feel satisfied if you earn more than your friends. Researchers at the University of Warwick and Cardiff University found that 'the ranked position of an individual's income,' or how much more you are earning than your peers, is a more reliable determinant of life satisfaction than the actual amount of money you make. But this means the end goal keeps moving forward. If you earn a million dollars, it won't be enough to make you happy if you surround yourself with people earning five-million dollars. The problem is further intensified when your relative lack of money spirals into self-criticism or even resentment towards others.
These results support the notion that making everyone richer will not necessarily increase overall happiness.
- A study circulated by the National Bureau of Economic Research revealed that large-prize lottery winners “experience sustained increases in overall life satisfaction that persist for over a decade and show no evidence of dissipating with time.”
- The Higher Education Research Institute found that millennials, as first-year college students, ranked being “very well off financially” as their number-one goal.
- Researchers have found that people who prioritize time over money are happier.
- According to the UN’s World Happiness Report 2020, which measures data in “GDP per capita, life expectancy, social support, trust and corruption, perceived freedom to make life decisions, and generosity,” Finland is the happiest country in the world.