Research Finds Strong Link Between Wealth and Happiness: Can Money Buy Happiness?

A popular 2010 study titled ‘High-income improves evaluation of life but not emotional well-being’ by Daniel Kahneman found that happiness rises with a rise in income but plateaus at $75,000. But the latest reports from The Guardian said a new study conducted by a researcher from the Wharton School at the University of Pennsylvania found an increasingly positive association between money and happiness.

Study’s Findings

As reported in The Telegraph, Matt Willingsworth sampled 33,269 employed US adults aged 18-65 with household incomes of at least $10,000 each year, who answered questions on the scale ‘satisfaction with life’. Killingsworth also used data from the ultra-wealthy with a median net worth between $3m and $7.9m. 

“The difference in life satisfaction between the wealthy and those with annual incomes of $70-80,000 was nearly three times as large as the difference between $70-80,000 and the average of the two lowest income groups,” Killingsworth’s study said. His study also found wealthy individuals were “substantially and statistically significantly happier than people earning over $500,000 each year”.

Psychological Factors involved:

1. Sense of Control: According to Willingsworth-  “A greater feeling of control over life can explain about 75% of the association between money and happiness. So I think a big part of what’s happening is that, when people have more money, they have more control over their lives. More freedom to live the life they want to live.”

2. Freedom to Choose: Financial stability provides the freedom to make choices aligned with personal values and preferences. Whether it’s pursuing education, investing in personal growth, or supporting causes, wealth enables individuals to align their actions with their aspirations.

3. Reduced Stress: Economic security can certainly reduce stress related to financial uncertainty and everyday expenses. This stability allows for a focus on personal well-being, relationships, and overall life satisfaction.

4. Access to Opportunities: Wealth can open doors to unique experiences, cultural enrichment, and leisure activities that contribute to happiness and a sense of fulfilment.

5. Social Connections: It facilitates access to networks of like-minded individuals, fostering social connections and support systems that enhance well-being. 

6. Psychological Well-being: Research suggests that wealthier individuals may experience higher levels of self-esteem and optimism, possibly due to the perceived security and achievement associated with financial success.

It is very surprising how big the overall difference in happiness is between people who are wealthy and those who are low-income. This might indicate that apparently, money does buy happiness. But beyond monetary thresholds, psychological factors like control, freedom, and social connections play pivotal roles in shaping well-being.

While trying to understand these complexities, future research should explore how deeper psychological insights can redefine our understanding of money and its impact on happiness.