Money Buys Happiness for Most People, Researches Say

A new study finds that higher incomes are associated with increasing levels of well-being except for an already affluent, but unhappy, minority. More, may indeed, be better.

Previous research findings on the relationship between money and happiness have been contradicting. A 2010 study suggested that daily happiness increased with growing annual income but plateaued above $75,000. Meanwhile, research from 2021 showed that happiness rose steadily with income well beyond $75,000 without evidence of a plateau.

The new study suggests that, on average, larger incomes are associated with increased happiness levels. However, among the least happy people, happiness rises sharply to $100,000 annually and then plateaus. At the same time, individuals in the middle range of emotional well-being see their happiness increase linearly with income. While for the happiest people, the association accelerates above $100,000.

Published in the Proceedings of the National Academy of Sciences, the research focused on a new hypothesis that both a happy majority and an unhappy minority exist. For the former, happiness grows along with rising incomes; for the latter, higher income leads to more happiness, but only up to a certain income threshold, after which it does not progress further.

To test the hypothesis, researchers looked for the flattening pattern in data from more than 33,000 people from the 2021's study collected through an app called Track Your Happiness. The program asked participants various questions, including how they feel, at random moments several times daily. The researchers then took an average of the person's happiness and income to conclude how the two variables are linked.

"In the simplest terms, this suggests that for most people, larger incomes are associated with greater happiness," says Matthew Killingsworth, Ph.D., a senior fellow at Penn's Wharton School and lead paper author. "The exception is people who are financially well-off but unhappy. For instance, if you're rich and miserable, more money won't help. For everyone else, more money was associated with higher happiness to somewhat varying degrees."

The study authors say such findings could inform thinking about tax rates or employees' compensation. But, at the same time, they emphasize that money is only one of many determinants of happiness, even though higher incomes can help a bit.

While money doesn't buy happiness for all, lack of it may substantially contribute to unhappiness. Studies indicate that people living in poverty are more likely to develop mental health problems and start treatment for them. However, even if they start and complete the treatment, they are at higher risk of ongoing mental health problems.

Research in Germany revealed that people with mental health issues are disproportionately affected by debt. Of 486 psychiatric patients, more than half (55.1%) had outstanding debts, loans, or unpaid bills, compared to 8.6% of the general population.

Money doesn't only impact adults, either. Poverty may start affecting happiness from a very young age. In England, for example, children living in poverty report their well-being to be 10% lower on average than their more affluent peers.

Overall, money may not buy all of our happiness, but it sure can help.