They say that money makes the world go ’round, and many people spend their lives trying to earn as much money as they can. But how does money interact with personal happiness? Though having enough money to live comfortably certainly contributes to happiness up to a point, studies show that above this threshold, more money does not mean more happiness. It would seem that beyond a certain point, you can’t buy happiness for yourself. But it might be possible to buy happiness for yourself when you spend money on others.
This is not a radical idea, and it probably won’t blow your mind with its incredible newness. Far from it; it’s actually folk wisdom. Most people have heard some version or other of the old adage, “’tis better to give than to receive”. It turns out that giving actually is empirically better, at least in terms of happiness. It’s advice that sometimes goes against our natural instincts for self-preservation, but it’s worth repeating.
- The Evidence
- Money and the Mind
- Why Prosocial Spending Promotes Happiness
- The Giving Brain
- Relating to the World
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. Contrary to many people’s instincts, prosocial spending results in more happiness than does spending money on yourself (check out other factors of happiness in Seligman‘s PERMA model).
In a series of experiments by Elizabeth Dunn and colleagues, employees were asked about their general happiness levels before and after receiving their annual bonus(2008). Regardless of the size of the actual bonus, employees who spent more of their bonus money on others or on charity reported greater general of happiness 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 and the dollar amount is small, we still feel the happiness that accompanies giving to others.
Note, however, that the research described above was conducted in North America. Do these findings persist across diverse cultural contexts? This question was tested empirically 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.
Money and the Mind
If prosocial spending makes us feel good, why do so many people tend to think that personal spending will make us happier? It’s because of the insidious effect that money has on the mind. Studies have shown that the simplest reminder of money has all kinds of negative effects (Vohs et al., 2006). Being reminded of money makes people less likely to help others, donate to charity, or spend time with others. Furthermore, a simple reminder of money makes people three times more likely to want to work alone, despite knowing we’re taking on more work.
Helping and connecting with others are precisely the behaviors that are likely to make us happy, yet just being reminded of money makes us less likely to engage in them. Humans have strong self-preservation instincts. Reminders of our personal responsibilities to maintain enough wealth to sustain ourselves and our loved ones can make forget how good we feel when we do something for someone who needs it more than we do.
Though money can be the root of all evil, it is not evil in and of itself; under the right circumstances, it can motivate us to work for something tangible for those who need it. But the constant reminder of the necessity of money in the modern world clearly has some negative psychological effects. Fortunately, generosity can be a very effective antidote.
Why Prosocial Spending Promotes Happiness
Why is it that spending our money on others makes us happier?
It’s partly because giving to others makes us feel good about ourselves. Just as showing gratitude does, giving helps promote a responsible and generous self-image, which in turn makes us feel happy. It’s also partly because spending money on others helps cement our social relationships, and people with strong social ties are generally happier than people who don’t have strong relationships.
Spending money on others also constitutes a form of experiential purchase, even if what you bought is material. What you’ve actually purchased for yourself is the experience of helping or pleasantly surprising someone else. In 2009, Nicolao, Irwin, & Goodman found that people have heightened emotional responses to experiential rather than material purchases. This means that paying for a great vacation made people feel better than buying an object that they really liked at the same price. From your perspective, prosocial spending is like buying the experience of someone else’s happiness and gratitude. What could possibly feel better?
The Giving Brain
Humans are social creatures, who depend on the ability to foster teamwork with others to survive. To this end, the human brain has a built-in reward system that manages how we interact with others: the neurotransmitter oxytocin. Though many people view oxytocin as a simple “love hormone”, it actually has a very complex effect on social interactions and has the potential to heighten both negative and positive associations. With respect to the happiness that prosocial spending produces, oxytocin might have something to do with the intensity of the feeling. When we spend money on others, it’s usually on friends and family who we consistently work to maintain good relationships with. When we spend money to help our friends and make our family smile, our brain rewards us for strengthening our social ties.
Relating to the World
Oxytocin doesn’t really seem to explain why it feels good to give to charity; in fact, it might actually explain some people’s reluctance to spend money on people who aren’t a part of their social group. The happiness that giving to charity brings might have something to do with a broadened perspective of what constitutes in- and out-groups. It is possible that people feel good when they give to charity because they have come to see the beneficiaries as a part of their symbolic family, be it human or denizen of the earth.
Widening our sense of how we relate to the other inhabitants of our world helps us to contextualize ourselves, how we are fortunate in our lives, and how we can help others who have not experienced the same fortune. In this regard, giving to charity seems to expand our neurological definitions of “in-group” to encompass those for whom we have empathy. How we relate to the world around us defines who we are to everyone else, as well as how we perceive ourselves. For this reason, it’s possible that the best possible way to treat yourself is by treating someone else.
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.