There’s nothing quite so delicious as watching miserable billionaires on a prestige television show like Succession. Sure, the characters have fabulous Manhattan penthouses, private jets, and top-of-the-line everything, and yet, they’re all still miserable. What a salve it is to suppose that the uber-rich are just like us—no matter how much their net worth is, they still can’t figure out how to buy joy, contentment or satisfaction.

That doesn’t stop us from dreaming, however. In real life, 68% of Canadians believe money can buy happiness, according to an Angus Reid survey conducted for financial services company Co-operators.

So, what does the research say about the connection between money and happiness? Does greater wealth lead to a happier life? Or is it foolish to think that money can buy happiness?

Before we can answer those questions, we need to clarify the meaning of happiness, at least in psychological terms.

How do psychologists define happiness?

Psychologists typically distinguish between two types of happiness: evaluative well-being and experienced well-being.

  • Evaluative well-being is how satisfied people are with their lives when they take time to pause and reflect.
  • Experienced well-being is a measure of the positive or negative emotions people feel at any given time.

“Happiness includes the experience of joy and contentment in the moment—say, eating a slice of cake or getting a ‘like’ on Instagram—but also a sense that life is good, meaningful and worthwhile,” says Gillian Mandich, founder of the Toronto-based International Happiness Institute of Health Science Research.

What’s the connection between wealth and happiness?

A number of research papers, including an oft-cited 2010 landmark U.S. study by behavioural economists Daniel Kahneman and Angus Deaton, show that as household income goes up, so does life satisfaction (a.k.a. evaluative well-being). Daily emotional happiness (or experienced well-being) on the other hand only improves with higher earnings up to a point—once household income hits a threshold of about US$75,000 annually (or US$96,000 in today’s inflation-adjusted dollars) day-to-day happiness levels off.

It makes sense. If you’re struggling to pay your rent or put food on the table, receiving more money would certainly help remove negative emotions such as stress, worry and hunger. But once those basic needs are met, the researchers found that emotional well-being was more closely tied to factors such as health and relationships than to income.

A more recent study from 2021, however, found that both overall life satisfaction, as well as day-to-day happiness, actually continue to go up with higher incomes without any threshold. (Although it’s important to note the vast majority of the 33,391 study respondents earned less than US$200,000, so it’s possible that a threshold of diminishing returns for happiness does exist, but is somewhere beyond that figure.)

The study’s author, Matthew Killingsworth suggests a couple of reasons behind these findings.

First, larger incomes often give people more control over their lives, which can also reduce their suffering. Indeed, when subjects were asked how in control of their lives they felt, their sense of control accounted for three-quarters of the association between income and emotional well-being.

The second determinant of subjects’ happiness relative to income was the subjects’ perceptions of money. Subjects across all income ranges were asked the question “To what extent is money important to you?” and their answers were strongly linked to their experienced happiness. Low earners were happier if they thought money was unimportant and high earners were happier if they thought money was important.

What’s the takeaway? On average, wealthier Americans are happier than poorer ones, but this sense of happiness is also contingent on factors such as how much freedom their money gives them and their outlook on finances in general.

Does happiness depend on financial success?

The answer to that is, it depends. Killingsworth’s study reveals some surprising results. The more that subjects equated money with success, the lower they experienced well-being. This was true at all income levels; even those with the highest earnings felt less day-to-day happiness if they conflated money with success, compared with those who thought of success as being independent of money.

In other words, the very concept of “financial success” is antithetical to happiness. This finding can go a long way toward explaining why financially “impoverished” people living in cultures that define success as having health, family, and a connection to nature may feel an abundance of day-to-day well-being, while many so-called wealthy people in Western cultures do not.

“The image in North American culture is that if I have this car, this house, this boat, then I’m going to be happy,” says Mandich. And while that way of thinking can lead you down the wrong path—where more is never enough—there are specific ways in which people can spend the money they have to increase their experienced well-being, as explored below.

How to actually buy happiness

Money can both help and hinder the pursuit of happiness, depending on how we spend it. Here are a few ways spending influences happiness, according to the research.

Buy the tools for self-improvement

Humans are remarkably adaptive creatures. That means we get used to the material goods we buy, and any joy we might initially feel from having them quickly dissipates. This “hedonic adaptation” can apply to both small and large purchases, anything from a new outfit to a new car. A notable exception, however, is products that are used for experiences, such as sporting goods (e.g., skis, skates, golf clubs) or musical instruments, according to a 2015 study, as they can lead to greater feelings of competence.

Buy experiences over material goods

A sort of corollary to the above, research shows that money spent on experiences such as concerts, trips, restaurant meals and sporting events is associated with significantly greater happiness than money spent on material purchases like furniture, clothing, or jewelry.

Buy yourself some time

2017 study by UBC psychology professor Elizabeth Dunn found that working adults across the income spectrum reported greater happiness and overall life satisfaction after spending money on a time-saving purchase, such as grocery delivery or lawn-care service, than on a material purchase.

Buy more for friends, family, or those in need

Another Dunn study found that spending money on others was particularly rewarding when people were able to see the difference their generosity made; when they felt a sense of social connection to the person or cause they were helping; and when they had a choice about how and when to give. This applies to charitable giving. You’ll feel happier if a charity outlines the specific impact your donation will have. Presents you give to family or friends also boost your sense of satisfaction.

How to live a “rich life” (without going broke)

Taking the above research (and other studies) into account, there are definitely some happiness “hacks” you can use to improve your well-being and feel enriched, no matter what your income level. These are a few to try, according to Mandich.

  • Count your blessings. While it’s natural for humans to compare ourselves to those who have more than us, you can overcome that tendency by taking time to appreciate what you do have. “Gratitude shifts the lens of how we see things,” she says. “When you look at what you have right now, you’re not living in the future or past, it brings us into the moment. To me, that’s true wealth.”
  • Savour the small stuff. Bringing your attention to things through gratitude can then help you really squeeze the most enjoyment out of what you have. For example, if you splurged on a pair of super warm and comfy winter boots, try to focus on how good it feels every time you wear them. “Happiness is a practice, not a destination,” says Mandich. “Savouring is a great way to find happiness on the journey.”
  • Do for others. Whether it’s shovelling a neighbour’s driveway, buying a coffee for a stranger at the cafe, or simply giving a compliment, these small gestures are a surefire way to create happiness. “You’ll not only increase your happiness, but the person on the receiving end will also get a boost, and so will anyone who witnesses that kind act,” she says.
  • Carve out time for friends and family. “The number one factor for happiness—above money, occupation, gender and age—is social connection,” says Mandich. Ironically, the very same devices that allow us to stay in touch with others can get in the way of our happiness. For example, Dunn has conducted experiments that show when people had access to their phones during a dinner out with friends and family, they enjoyed it significantly less compared to groups that did not have access to their phones. So, put electronic devices away if you can.

The last word

Once you have enough money to take care of yourself, exert some control in your life, and spend time with others, accumulating more may not give you much bang for your buck. “We are good at self-reporting our own happiness, but we’re not good at determining what it is that makes us happy,” says Mandich. “We think it’s all these big moments, but it’s really about creating small bursts of joy throughout the day and paying attention to them.”

About the Author

Tamar Satov

Tamar Satov

Freelance Contributor

Tamar Satov is an award-winning journalist specializing in the areas of personal finance and parenting. Her work has appeared in Canadian Living, The Globe and Mail, Today’s Parent, Parents Canada, Walmart Live Better and many other consumer magazines and websites.

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