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Money and Happiness — Unravelling a Complex Relationship

By Amanda Reaume

Published August 23, 2023 • 3 Min Read

The question: “Can money buy happiness?” comes up frequently enough that many scholarly studies have tried to find a definitive answer. While being able to cover life’s necessities can bring a sense of satisfaction, beyond a certain point, it’s unclear if more money equals more happiness.

One study on money and happiness from McGill University showed that “People in societies where money plays a minimal role can have very high levels of happiness.”

The longest study on the quality of life — the Harvard Study of Adult Development — began in 1938 and tracked people for decades to find out what really makes for a satisfying life. “We had people who were CEOs, who made lots of money, or who became famous. Those things did not relate to happiness,” said Robert Waldinger, director of the Harvard study, in a talk for McKinsey & Company.

According to experts, money can create satisfaction with life if it:

  • Supports the necessities of life: safety, security

  • Provides a greater sense of control in life, freedom and choice

  • Allows for personal growth

Money may stifle happiness when an individual:

  • Believes money will “fix” things or fill a sense of emptiness

  • Equates money with self-worth

  • Prioritizes it over other more important elements, such as relationships or time spent with family and friends

While money can help create a sense of satisfaction in life, according to research, personal happiness is not about having more money — it’s about understanding how it can be used to drive a greater sense of personal well-being. Here are a few ways money can help cultivate long-lasting happiness:

A sense of security

In most parts of the world, money is required to meet basic human needs, such as shelter, food and healthcare. When there are stressful economic times like recessions, money beyond one’s basic needs can cultivate a sense of security and stability, reducing stress and contributing to overall happiness. However, there is a fine line between having enough money to feel secure and prioritizing money at the expense of relationships or health.

Access to opportunities

Money can give individuals opportunities and resources that may enhance their well-being. Whether it’s the ability to travel, buy a home, pursue higher education, or engage in other leisure activities, money may lead to greater long-term happiness.

Relationships over purchases

One of the consistent findings in the Harvard Study is that people who have strong relationships with spouses, friends and/or coworkers reported overall greater satisfaction throughout life. Investing in relationships over purchases allows individuals to spend quality time with family and friends, engaging in activities that create memories for years to come.

Giving to others

Children hear early, “It’s better to give than to receive.” Giving to others can positively impact the receiver and the giver. This is because creating a positive impact on the lives of others not only creates a sense of happiness for the two parties but may also provide the giver with a greater sense of meaning and fulfillment.

While many factors contribute to personal happiness, money alone doesn’t drive it. What’s done with money and how that fosters a sense of satisfaction with life is what contributes to longer-term happiness.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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