Want to Be Happier? Spend Money on Others

March 20, 2008 — -- You may not be able to buy happiness, but the way you spend your money can make you happier, researchers say.

According to a new set of studies, people who spend money on others, either by donating to a charity or buying gifts, are markedly happier than those who do not.

The paper, published jointly by Harvard Business School and the University of British Columbia at Vancouver in the journal Science this week, found that people who gave away as little $5 rated themselves as happier than they did before giving the money away.

"I kept seeing the conclusion drawn that money can't buy happiness. That was based on the fact that the correlation between income and happiness was pretty low," said Elizabeth Dunn, the lead author of the paper and an assistant professor of psychology at the University of British Columbia. "But just because money doesn't typically buy happiness shouldn't be taken to mean that it can't. How could people use their money more effectively so that it would actually deliver more happiness?"

To explore this question, Dunn and her research team performed three experiments to explore the relationship between money and happiness.

The first study asked a representative sample of 632 Americans to rate their general happiness on a five-point scale and to report their annual income. Participants were also asked to estimate how much they spent in a typical month on bills, gifts for themselves, gifts for others and donations to charity.

"We wanted to know whether we could find the overall relationship between how people spend money and how happy they were," Dunn said. "We found people who reported spending more on others reported greater happiness. But it doesn't tell us much about causalities."

To find out whether spending money on others and happiness are directly connected, Dunn conducted two additional studies.

In the first one, the team asked 16 employees at a small Boston company how happy they were before receiving their bonus, on average $5,000.