Does money make you happy?
May 29, 2019 - 2 minutes read
Posted by Claire Parker
It’s official, money is the leading source of anxiety for Brits. According to research for the Guardian, 30% of Britons consider money as the greatest cause of their anxiety, almost double the figure of the next highest cause, family, at 16%. Logically, that would suggest that an abundance of money would be a solution to that anxiety, but is that actually the case?
The jury is out, but we certainly have some interesting data to base our conclusions on. An oft-cited survey, conducted on 1000 American citizens in 2010, points to the answer that yes, money does make us happier, but there is a cap to that happiness increase. When economist Angus Deaton and psychologist Daniel Kahneman undertook the report, they concluded that self-reported levels of emotional wellbeing did rise in line with salary up to $75,000 a year (roughly £47,000 at the time, which adjusted for inflation falls closer to £60,000 in 2019). They make a distinction between emotional well-being and “life evaluation”, which rather than being a measure of the frequency and intensity of emotions such as joy and sadness, is a measure of the positivity of conscious thoughts people hold when actively reflecting on their position in life. Life evaluation was measured to increase steadily alongside income, without cap.
However, a study undertaken by Betsey Stevenson and Justin Wolfers of the University of Michigan in 2013, refutes the idea of a well-being cap entirely. Having compared life satisfaction and happiness across countries rich and poor, and rich and poor people within those countries, they came to the conclusion that “the relationship between well-being and income… does not diminish as income rises.” and stating that, “if there is a satiation point, we are yet to reach it.” Although their research does point to diminishing marginal gains as income increases, there doesn’t appear to be a point at which those gains halt entirely.
What is widely agreed upon within the academic and economic community is that regardless of the exact impact of increasing incomes on happiness and well-being, low income is certainly associated with both low emotional well-being as well as low life evaluation. Low income is also shown to increase the level of emotional distress caused by life events such as divorce and ill health.
Whatever conclusion you come to based on the available data, it’s clear that looking after your existing wealth and planning ahead for your financial future can only be a positive decision.