Can money buy happiness?

A psychology study looking into consumer purchases has found that those who buy experiences are happier than those who buy things. Can money buy happiness?

The study was performed at Cornell University by Dr Thomas Gilovich, who has been studying the relationship between money and happiness over the last two decades.

The study was exploring the ‘Easterlin Paradox’, a key concept in Happiness Economics (yes, that’s a real thing, and Australia ranks quite highly), which explains that money can buy you happiness, but only so much of it.

Participants in the study were asked to report their happiness with major purchases, both material (such as new smartphones, TVs and cars) and experiential (such as learning new skills, travel and concerts). Initially, most ranked their happiness with both types of purchase at the same level. However over time the rankings for material purchases went down, while the rankings for happiness with experiential-based purchases went up.

It might seem counterintuitive that the happiness related to physical purchases went down, despite them still existing and being used daily, but it turns out that this is actually why the feeling of happiness diminishes. These material objects quickly become part of daily routine, transitioning from new and exciting to plain and everyday, while the memories of experiences you have, live on untarnished in your memory.

Participants were also more likely to negatively compare their material purchases with those of others, diminishing satisfaction with a purchase even further. As experiences are more difficult to compare than material objects, participants were less likely to do so.

Another study revealed that even when people had a bad experience that negatively affected their happiness, their happiness with the experience still increased over time. Anyone who does a lot of travelling probably has a few nightmarish tales that have now become funny anecdotes.

How do you spend your savings? Will this change your habits or perhaps reinforce them?

Read more at Co.Exist.

Written by YourLifeChoices Writers

YourLifeChoices' team of writers specialise in content that helps Australian over-50s make better decisions about wealth, health, travel and life. It's all in the name. For 22 years, we've been helping older Australians live their best lives.

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