Story at a Glance.
Whilst it’s always easy to imagine that a tonne of money will solve all of your problems, as it transpires, it’s how you spend your money, not how much of it you have, that will put a smile on your dial.
And science can prove it.
What researchers at Harvard have found is that it’s not spending it on yourself that gives us a kick, it’s spending it on others.
“In particular, both correlational and experimental studies show that people who spend money on others report greater happiness. The benefits of such prosocial spending (spending on others) emerge among adults around the world, and the warm glow of giving can be detected even in toddlers,” the study noted.
Turns out, whilst we think we understand our relationship towards money and our connection to happiness – we don’t.
In the study(1) the researchers described the upcoming experiment to a group of non-participants.
People were to be approached on a university campus where they were to be given a $5 or $20 note. Half of the group were instructed to spend it on someone else and the other half, to spend it on themselves.
The non-participants were then asked what they predicted the outcome would be: who would be the happiest at the end of the experiment? Those spending the money on someone else or those enjoying the windfall for themselves?
Interestingly, the non-participants’ predictions weren’t just wrong. They were doubly wrong.
They believed having more money – the $20 rather than the $5 would make them happier. And that spending it on themselves would also increase their happiness.
At the end of the day the researchers interviewed the college students. Those who had been assigned the job of spending money on someone else reported feeling happier over the day than those who had the cash to spend on themselves. And moreover, it made no difference the amount of money they got to their overall happiness.
“Thus, people’s daily spending choices may be guided by flawed intuitions about the relationship between money and happiness,” notes the Harvard report.
Another study, on the psychological consequences of money, published in Science(2), suggests that money may isolate you, making you more of a loner and less likely to be happy.
“… Participants primed with money preferred to play alone, work alone, and put more physical distance between themselves and a new acquaintance.”
Whilst it’s true that having money makes us want to go out and spend it on ourselves, thinking gleefully of all the happiness such purchases will provide, the truth is quite different. Spending money on other people is what actually makes us happy.
“Thinking about money may propel us toward using our financial resources to benefit ourselves, but spending money on others can provide a more effective route to increasing our own happiness,” notes the Harvard study.
And here’s the interesting bit of news.
It’s a worldwide phenomenon. It’s not just wealthy countries where folk get a kick out of helping other people, poor countries are the same. In another study at Harvard(3) they found that out of 136 countries, 120 of them all found a positive relationship between giving and happiness. And that was irrespective of whether the country was rich or poor.
“The robustness of this mechanism is supported by our finding that people experience emotional benefits from sharing their financial resources with others not only in countries where such resources are plentiful, but also in impoverished countries where scarcity might seem to limit the possibilities to reap the gains from giving to others.”
Now you’re asking yourself, why are we programmed this way? What’s the biological pay off?
The research(3) sums it up nicely…
“From an evolutionary perspective, the emotional rewards that people experience when they help others may serve as a proximate mechanism that evolved to facilitate prosocial behaviour, which may have carried short-term costs but long-term benefits for survival over human evolutionary history.”
Maybe it’s time to shelve looking for that new pair of shoes or buying a new handbag. You may find that buying a pair of shoes for someone who has holes in theirs will bring you far more joy than blowing the cash on your ones.
 Prosocial Spending and Happiness: Using Money to Benefit Others Pays Off. Dunn, Elizabeth W., Lara B. Aknin, and Michael I. Norton. Science. 2006 Nov 17;314(5802):1154-6.
Prosocial Spending and Well-Being: Cross-Cultural Evidence for a Psychological Universal. Lara B. Aknin, Christopher P. Barrington-Leigh, Elizabeth W. Dunn, and John F. Helliwell, Justine Burns Robert, Biswas-Diener, Imelda Kemeza, Paul Nyende, Claire E. Ashton-James. Journal of Personality and Social Psychology © 2013 American Psychological Association 2013, Vol. 104, No. 4, 635–652 0022-3514/13/$12.00 DOI: 10.1037/a0031578