The Psychology of Happiness—Does Money Make People Happy?

From the lecture series: Understanding the Mysteries of Human Behavior

By Mark Leary, Ph.D., Duke University

Does money make people happy? We don’t have all the answers by any means, but we do know much more about happiness than ever. And the bottom line is that scientific research suggests that most of the things that people believe make them happy really won’t—at least not in the long run. So, let’s unravel the mystery of happiness.

Image of a young man happy with having money.
(Image: By Minerva Studio/Shutterstock)

Seriously, Can Money Buy Happiness?

So what does make people happy? Many people think that they will be happier if they just had more money. What are the facts, here?

Well, research shows that it’s certainly difficult to be truly happy if you live in poverty. If you’re always hungry or cold or living in unsafe surroundings or always owe somebody money, happiness can be elusive. So, below a certain income level, poor people are in fact less happy and less satisfied with their lives than most of us.

But above the poverty level, things get complicated.

This is a transcript from the video series Understanding the Mysteries of Human Behavior. Watch it now, Wondrium.

Researchers at Princeton University analyzed data from a sample of over 450,000 adults in the United States. These respondents reported their annual income, and they rated how much they experienced positive emotions on the previous day. Emotional quality was assessed by questions asking people to think about the previous day and to rate how much happiness and enjoyment they experienced, and how much they smiled and laughed.

The results showed that, up until an income of somewhere between $60,000 and $75,000—in 2010 dollars—more money was associated with feeling a little bit more happy. So a higher proportion of people who make, say, $70,000 tend to be happier than people who make, say, $40,000. The difference isn’t large, but it is statistically significant.

Learn more about evolution, self-awareness, and culture in understanding human behavior

Money “Fixes Problems”

The reason that money increases happiness up to a point seems to be that having a certain amount of money helps to fix certain problems in life that make people stressed out and unhappy. If my car breaks down, and I don’t have enough money to fix it, that’s stressful. If I have a health problem and not enough money, I have two sets of worries—my health and my money. If I get divorced and there’s not enough money for legal costs and keeping up two houses, the financial issues make the breakup worse than it would otherwise be.

Money can help to solve problems that would otherwise lower our happiness (Image: By noppawan09/Shutterstock)

So, it’s not so much that money makes people happy as that money can help to solve problems that would otherwise lower our happiness. So, having a certain amount of money helps take the sting out of our adversities.

But, here’s the interesting thing: after people have somewhere between $60,000 and $75,000 a year, there’s no relationship between income and happiness.

…after people have somewhere between $60,000 and $75,000 a year, there’s no relationship between income and happiness.

Let me say that again, once a person has about $75,000 a year, having more money is not associated with greater happiness! Not at all. The average millionaire is no happier than the average person who makes $75,000 a year.

Many people have trouble reconciling this finding with the fact that they know that they feel happy when they get a raise at work, even a small raise. Or they may even feel happy when they find a quarter on the sidewalk! But that’s a very fleeting feeling.

The day you get your raise, you probably are happier; and maybe even the day after that. But how long does that glow last? Many people think that money will bring them lots of happiness for a long time, but it actually brings them only a little happiness for a short time.

Learn more about why we have such a wide variety of emotions

And, you can see that this is true if you think about your own earning history. People generally make more money as they get older. So, many of you who are working make more money today than you did, say, 10 years ago. Are you happier now on a daily basis because you make more money?

And, if more money makes people happy, then as a society, we ought to be much happier today than people were, say, 50 or 60 years ago. Even adjusting for inflation, the average person in the United States is much better off than they were in, say, 1940. In 1940, a third of all houses still didn’t have running water and indoor toilets! But national polls show that people actually rated themselves happier in the 1940s than they do today.

Learn more about the function of self-esteem

I know that it seems like it, but having more money and big screen TVs and expensive cars don’t make people happier. Of course, this is something philosophers have observed for hundreds of years. But now science is showing just how right they were.

Continued in the article What Makes People Happy? Genetics vs. Circumstances

Common Questions Money and Happiness

Q: Does money actually make people happy?

Money does make people happy in many ways. It is not the final solution to life’s problems, but it makes many of them easier to surmount.

Q: What makes people happy?

It has been shown that what makes people happy, while entirely subjective, often centers around three main concepts including a strong and close relationship to others, utility in society, and helping others.

Q: Is money an essential component of happiness?

Money is one of the prime components of happiness, depending on the lifestyle of the person who would be asked.

Q: Is there a salary that makes you happy?

Although there are an incredible number of variables such as where you live in the world, researchers have estimated a salary of $60,000 to $75,000 a year to be conducive to emotional well-being, while a salary of $95,000 dollars a year creates life satisfaction. Salaries above these amounts begin to show diminishing returns in relation to increased happiness.

This article was updated on 12/20/2019

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