Contrary to many people’s instincts, money spent on others (a.k.a. prosocial spending) gives more happiness than money spent on themselves. Check out other factors of happiness in Seligman‘s PERMA model.
This is not a radical idea which will blow your mind with its incredible newness. Far from it, but because it’s advice that sometimes goes against our natural instinct, it’s worth repeating.
Research suggests that many people think that spending money on themselves will make them happier than spending it on other people (Dunn et al., 2008). However, several studies have shown that this isn’t really true.
In a series of experiments by Elizabeth Dunn and colleagues (2008), employees were asked about their general happiness levels before and after receiving their annual bonus. No matter what the size of the actual bonus, employees who spent more of their bonus money on others or charity reported greater general happiness levels than those who spent more of it on themselves.
In another experiment, they discovered that participants who were directed to spend a small amount of money on others (either $5 or $20) reported greater feelings of happiness than those who were directed to spend the same amounts on themselves. Again, the dollar amount didn’t matter. This suggests that even when the choice isn’t ours, we still feel the happiness effects of giving away money to others — even when the actual value is small.
Note, however, that the above described research was conducted in North America. Do the findings persist across diverse cultural contexts? This was tested in research by Lara Aknin and colleagues (2010). They found that human beings around the world derive emotional benefits from using their financial resources to help others. They analyzed data from 136 countries, and found that prosocial spending was consistently associated with greater happiness.
Why prosocial spending promotes happiness
Why is it that spending our money on others—prosocial spending—makes us happier?
It’s partly because giving to others makes us feel good about ourselves, just like showing our gratefulness does, as explained in the effects of gratitude. It helps promote a view of ourselves as responsible and giving people, which in turn makes us feel happy. It’s also partly because spending money on others helps cement our social relationships. And people with stronger social ties are generally happier.
So if prosocial spending makes us feel good, how come we tend to think personal spending will make us happier? It’s because of the insidious effect money has on the mind. Studies have shown that the simplest reminder of money has all kinds of negative effects (from Vohs et al., 2006). It makes us:
- Less likely to help others.
- Less likely to donate to charity.
- Less likely to spend time with others.
- Three times more likely to want to work alone, despite knowing we’re taking on more work.
These are all precisely the behaviours that are likely to make us happy, yet just being reminded of money makes us less likely to engage in them. It’s not that money is always evil; under the right circumstances it can motivate us and modern societies would be difficult without it. But money clearly has some negative psychological effects. Generosity can be a very effective antidote.
Want to know more? Check the TED talk below or subscribe to one of these positive psychology courses.
Aknin, L. B., Barrington-Leigh, C. P., Dunn, E. W., Helliwell, J. F., Burns, J., Biswas-Diener, R., Kemeza, I., Nyende, P., Ashton-James, C. E., & Norton, M. I. (2013). Prosocial spending and well-being: Cross-cultural evidence for a psychological universal. Journal of Personality and Social Psychology, 104, 635-652.
Dunn, EW, et al. (2008). Spending money on others promotes happiness. Science, 319(5870) 1687-1688.
Nicolao, L. Irwin, J.R., & Goodman, J.K. (2009). Happiness for sale: Do experiential purchases make consumers happier than material purchases? Journal of Consumer Research, 36(2), 188-198.
Vohs, K.D., Mead, N.L., & Goode, M.R. (2006). The psychological consequences of money. Science, 314, 1154–1156.