social sciences

Money does bring us happiness, depending on how you spend it

There is no denying we need money in order to survive within a capitalist system. In order to get food, shelter, clothing, warmth to be able to actively participate in society, we need some kind of income. But once we’ve reached the threshold of being able to meet these basic needs, we can actively spend money on what some might define as luxurious. For instance, this can be anywhere from candy, entertainment, cars, vacation, depending on your budget and preferences. In this article, I will discuss two ways of spending that can increase happiness or life satisfaction.

Materialistic vs experiential spending
Simply put, we can spend money on two different categories. We can buy a new car, this would be materialistic spending. Or we could book a vacation, and this would classify as experiential spending. A vacation is an experience that you can treasure as a memory. However, while this distinction is made, I would like to get a bit philosophical and point out that a car can also be seen as experiential spending. If you enjoy certain experiences with a car, such as going on road trips, it might not just be a materialistic investment. But, for the sake of the research I will discuss, cars are in this case materialistic.

It turns out we feel happier after experiential spending than materialistic spending. This is due to several reasons, we get used to materialistic spending, we remember experiential spending, and experiential spending is often spent with others (1). So if we bought a new painting for our living room, we will be used to it at some point, hanging there. It probably won’t bring us the same amount of happiness it did when we first hung it up. We also spent a great deal remembering our experiential purchases in comparison to our materialistic purchases. And lastly, we often spend time with others when we engage in experiential spending. Which makes us happier in general.

Spending money on others
The second way in which we can spend money is using it to buy things for others. This is referred to as prosocial spending. Researchers gave participants a small amount of money and either instructed them to spend it on themselves (personal spending) or to buy something for someone else (prosocial spending). And it turns out that those who engaged in prosocial spending ended up feeling happier (2).

1. Dunn, E. W., Gilbert, D. T., & Wilson, T. D. (2011). If money doesn’t make you happy, then you probably aren’t spending it right. Journal of Consumer Psychology, 21(2), 115-125.
2. Dunn, E. W., Aknin, L. B., & Norton, M. I. (2008). Spending money on others promotes happiness. Science, 319(5870), 1687-1688.

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