Money can buy happiness… If you give it away

Imagine that every morning someone gives you an envelope with either $5 or $20. You never know which. And each day you are asked to either spend it on a treat for yourself, or spend it on a gift for someone else. Then that same person calls you at 5pm to ask how your day went. How do you feel?

Turns out that the answer to the question, “Can money buy you happiness?” is Yes. The kicker is that the greatest happiness comes from spending it on someone else. And as it turns out, how you spend the money is much more important than how much money it is.

Michael Norton and his colleagues Elizabeth Dunn and Lara Aknin researched whether money can really buy happiness. The hypothesis was that after basic needs of shelter, food, education, and living standards are met, extra income has little impact on personal happiness, except when we spend it on acts of generosity.

The reason for the study was based on the paradox that although people spend so much of their time and effort trying to make more and more money, having all that money does not seem to make them as happy. Could it be that they were not spending money the right way? The idea was if people were encouraged to spend money differently, perhaps we might be able to generate a greater sense of joy within ourselves and others.

An interesting part of the study revealed that this goes directly against our own instincts. When asked, 65% of those surveyed stated that spending money on themselves would make them the happiest. Additionally, over 85% believed that receiving $20 to spend would have a greater happiness advantage than $5. Wrong again. Turns out that the amount we spend on others doesn’t make than much of happiness difference. The important part is the act of generosity, not the amount we spend.

The same is true at our work. Lending resources across divisions and product lines increases collaboration, unity and sense of shared purpose. Generosity of time, energy, and commitment builds our own sense of belonging and joy. Remember, generosity only makes you richer.