Although a number of studies have focused on the effect of income on happiness, Elizabeth Dunn, a social psychologist at the University of British Columbia, also wanted to understand the effect of spending choices on happiness.
For example, previous research clearly demonstrated that income has a positive effect on level of happiness, but these levels remain flat over time even as income increased. This finding puzzled Dunn and she wanted to find out why happiness did not increase along with income. Could the reason be, Dunn wondered, that people poured their increasing wealth into purchasing consumer goods that did not provide lasting happiness? As an alternative, could spending money on other people have a more positive impact on well-being than spending money on oneself?
As an initial test of the relationship between spending choices and happiness, Dunn worked with graduate student Lara Aknin and Harvard Business School assistant professor Michael Norton to survey a nationally representative sample of Americans. The study participants were first asked to rate their happiness and to report their annual income. Next, they were asked to estimate how much they spent on themselves and how much they spent on others. Analysis of the data revealed that personal spending was not related to happiness, but higher levels of giving was significantly related to higher levels of happiness.
Next, Dunn and her team studied a group of employees before and after receiving profit sharing bonuses. They wanted to know if choices regarding how an economic windfall was spent would also affect happiness. One month before receiving their bonuses, the employees were asked to report annual income and general happiness. Then approximately 6-8 weeks after receiving their bonuses, the participants were asked to report their level of happiness again and how they spent their bonuses:
1. On themselves (bills, expenses, and gifts for themselves)
2. On others (gifts for others and donations to charities).
Analysis of the data again demonstrated no relationship between personal spending and happiness while spending on others was shown to be significant predictor of happiness.
Therefore, with such a positive influence on emotional well-being, why aren’t more people giving and/or giving more? Dunn believes the reason is that most people don’t know about the connection between giving and happiness. For most individuals, increased awareness will be necessary to understand and benefit from the connection between giving and higher levels of happiness.
This was certainly the case for Dunn herself. In a 2019 TED Talk, she described how—despite her own research showing that giving to others makes us happier—she rarely experienced that herself when donating to a charity. However, that changed when she helped to support a family of Syrian refugees as they prepared to relocate to her community. Dunn saw firsthand how her time and resources helped the family settle into their new home and make a fresh start. Her personal connection was extremely gratifying and encouraged her to continue her support.
Therefore, the lesson for Dunn and for everyone is this: Instead of feeling like we’re donating to an impersonal institution or cause, we can increase our happiness by seeking a personal touch when we give back. Dunn explained,
Humans have evolved to feel a boost of joy when we help others. We can lean into that joy by making a personal connection with those we help, amplifying our happiness and inspiring us to do more.
Reprinted by permission of Money Quotient, Inc.