B2-33 · Can Money Buy Happiness?

Can Money Buy Happiness?

"Money can't buy happiness," says the old proverb. Many people who have struggled to pay their bills would disagree. So who is right? Over the last few decades, psychologists and economists have tried to answer this question with data instead of proverbs – and the answer turns out to be more interesting than a simple yes or no.

More money, more happiness – up to a point?

There is no doubt that poverty makes life harder. People who cannot afford food, housing or medical care live with constant stress. For them, extra money clearly brings more security and well-being.

But what about people who already have enough? In 2010, the Nobel Prize winners Daniel Kahneman and Angus Deaton published a famous study of American households. They found that people's day-to-day emotional well-being rose with income, but only until about 75,000 dollars a year. Beyond that point, more money did not seem to make people feel much happier from day to day, although they did rate their lives as more successful.

For years, the "75,000-dollar limit" was quoted everywhere. Then, in 2021, the researcher Matthew Killingsworth collected data from tens of thousands of people through a smartphone app and found that happiness kept rising with income well above that level. In 2023, Kahneman and Killingsworth did something unusual in science: they worked together to solve the disagreement. Their conclusion was that for most people, more money does mean more happiness, but for the unhappiest group of people, the benefits stop at a certain level. Money, it seems, can reduce many problems, but it cannot fix all of them.

It's how you spend it

Perhaps a more useful question is not how much money we have, but what we do with it. Research suggests three ways of spending that tend to bring more happiness.

First, buy experiences rather than things. A new phone is exciting for a few weeks, and then we get used to it – psychologists call this the "hedonic treadmill". A trip, a concert or a course, on the other hand, gives us stories and memories that often become more valuable over time. Experiences are also usually shared with other people, which brings us to the second point.

Second, spend money on others. In one well-known experiment by Elizabeth Dunn and her colleagues, students were given an envelope with a small amount of money. Some were told to spend it on themselves, others on someone else. In the evening, those who had spent it on others reported feeling happier – even though the amounts were only five or twenty dollars.

Third, buy time. People who pay to avoid tasks they hate, such as cleaning or a long commute, tend to be more satisfied with their lives. Time with friends and family is one of the strongest predictors of happiness, and money that gives us more of it is often well spent.

Comparing ourselves to others

There is one trap that money cannot help us escape: comparison. If your salary rises but your friends' salaries rise more, you may actually feel worse. Social media makes this problem bigger, because we constantly see the most expensive moments of other people's lives – the holidays, the cars, the perfect meals – but not their bills or their worries.

So, can money buy happiness?

The honest answer is: partly. Money cannot buy love, health or meaning, but it can buy security, freedom and time – and those make happiness much easier to find. As one researcher put it, money is a tool. Like any tool, it depends on how you use it.