Does having more money make people happier? You might think it’s a trick question – anyone who’s struggled with money or worried about their financial lives knows that a windfall can make a big difference.
But it turns out that, in the bigger picture, the relationship between money and happiness is a complicated one.
Money does cause stress
It’s clear that when you have money worries, it is not good for your overall happiness and wellbeing.
Research by the Financial Services Council found that more than half of New Zealanders surveyed felt that financial issues affected their overall wellbeing, a proportion that has increased in recent years.
Another survey, by Sorted, found that money stress could even stop people from accessing health services, making good food choices and even exercising.
What’s more, Stats NZ data showed that people with a household income of $30,000 or less and those who were unemployed rated their overall life satisfaction significantly lower on average than the total population. And they were also more likely to say they did not feel a sense of control over their lives.
More helps, to a point
Studies have shown that having more money does boost happiness and overall wellbeing for those who are struggling, particularly in relation to outcomes for children. But, once you have enough to live comfortably, it doesn’t necessarily follow that the richer you are, the happier you will be.
Research in the United States showed that beyond a certain point, further increases could actually make people more unhappy. Global analysis suggested that in New Zealand, a household salary of just under $180,000 would provide peak happiness. Plus, other research found that people would get happier as they earnt more, but each dollar had slightly less impact than the last one.
The average difference in life satisfaction between two people earning US$40,000 and US$80,000 was about the same as that between two earning US$80,000 and US$160,000. Only a small percentage of the overall variation in happiness is explained by differences in income.
What’s the problem with being ‘super rich’?
Some researchers have suggested that the problem with having a huge amount of money – like a windfall lottery win – is that it gives you the sort of unlimited choice that can be uncomfortable to deal with. Simple decisions could become overwhelming because there are no parameters set by what you can afford.
Another suggestion is that there are no real challenges: if you have a lot of wealth, you can buy anything you want. Yet another is that it can change your relationship with other people and the way you interact with them.
A ‘no worries’ fund
One of the biggest drivers of money happiness is knowing that you are covered for emergencies. Research by ANZ in 2018 showed that people with less than $1,000 in savings were likely to have low levels of financial wellbeing and happiness.
Knowing that you can survive a period of time with less income, or a surprise bill, gives important peace of mind – whether that’s because you have a good level of savings in a “no worries” emergency savings account, or solid insurance in place.
Nigel Latta suggests that if you want your money to make you happier, consider spending it on experiences – or other people.
Want to talk?
If you have money worries you’d like help with, or just want to talk about how to manage your finances in a way that works for you, get in touch today.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.