Income, Wealth, and Happiness
You’ve likely heard the saying “money can’t buy happiness” hundreds of times. However, despite the nearly ubiquitous nature of this age-old adage, scientifically speaking, we actually know fairly little about the true relationship between wealth and well-being. Research on the subject has produced somewhat ambiguous results. While certain studies have found that greater income may play a minor role in happiness, many of these studies also state that money generally has a smaller impact on happiness than other factors in one’s life.
However, it is important to note that even within this limited field, most research related to money and happiness focuses solely on income and not on wealth; thus, despite our rudimentary understanding of income and well-being, we actually know far less about wealth and well-being from a research standpoint. This isn’t surprising. After all, there is an extremely small population of potential research subjects to pull from when focusing on high-net-worth individuals. As of 2020, just 1.45 million U.S. households had a net worth of at least $10 million.1 Even if this monetary threshold is lowered to $5 million, there are still only about 3.59 million U.S. households that qualify. Thus, compared with other subject areas of social science, it is far more difficult to recruit an adequate sample size of participants for research on wealth and happiness.
One of the few noteworthy studies that prioritizes the exploration of happiness and wealth is a 2018 study denotatively titled “The Amount and Source of Millionaires’ Wealth (Moderately) Predicts Their Happiness.”2 This study, hereinafter referred to as the “Wealth Study,” offers useful insights for both affluent and nonaffluent populations to better understand how money – and in particular, wealth – might influence happiness.
In the Wealth Study, the researchers surveyed over 4,000 high-net-worth individuals across 17 countries (24.1% from the U.S. and 24.4% from the U.K.); a majority (79.2%) were from developed countries, male (70.4%), and middle-aged (the median age group was 45 to 54 years old). All respondents had a minimum net worth of $1.5 million, and many had a significantly greater net worth (11.6% had between $8 million and $14.9 million, and an additional 11.6% had more than $15 million). Participants were asked questions about the sources of their wealth as well as about their happiness and life satisfaction.
The Happiness Curve and Wealth Generation
The Wealth Study identified two important findings. First, one’s wealth did appear to have a modest impact on his or her happiness, but only when it reached or exceeded approximately $8 million to $10 million. According to the data, this was the threshold at which a small but statistically significant increase of happiness was detected. Participants with a net worth below this threshold weren’t disadvantaged by their assets, but those assets also did not appear to play a factor in their overall well-being.
Prior research has suggested that the money-happiness curve may either “flatten out”3 or incrementally slow its rate of increase4 once people with higher incomes can meet their basic needs – approximately $100,000 in income in 2023 dollars. However, the Wealth Study suggested that the curve slopes up slightly when one accumulates at least $8 million to $10 million in wealth.
Of course, it’s important to remember that these results are only one study using survey data, albeit with a large number of participants, and have not yet been replicated or reproduced in other studies. It’s also necessary to recognize that the survey results show correlation, but do not prove causation – in other words, although there appears to be a link between happiness and wealth based on this data, it is impossible to say whether the wealth led to subjects’ greater happiness or the participants’ happiness made them more likely to achieve greater wealth. That being said, the Wealth Study’s authors briefly hypothesized why greater wealth may be linked to greater happiness among millionaires, listing the following possible reasons for this well-being boost:
Indeed, all of these factors have been shown to contribute to overall well-being across broad, nonaffluent populations; it logically follows that since wealth may provide individuals easier or greater access to these elements, wealth could be a direct or indirect contributor to happiness.
Second, the Wealth Study’s authors found another novel factor in their data: The manner in which wealth was acquired may affect overall well-being. More precisely, the research showed that wealth that was earned, rather than inherited, served as a positive predictor of general happiness. Said differently, the survey results showed a modest increase in happiness for wealth generators over wealth inheritors, even when researchers controlled for the size of a participant’s wealth.
As with the wealth threshold-happiness link, there is a great deal of ambiguity in this data, and it therefore should not be viewed as a determinative factor in one’s pursuit of well-being. Again, though the data shows a correlation between two factors, it does not prove causation. It is possible that happy people are more inclined to become wealth generators, rather than the other way around. Additionally, due to the nature of the study as well as the broad characteristics of its participants, the survey’s questions were not capable of being refined enough to pick up on specific differences among subjects that could have influenced the data.
However, if the data is accurate, and wealth generators are happier, on average, than wealth inheritors, there may be several explanations for this phenomenon. The study’s authors suggest that the effort of earning may lead people to value their wealth more than if it is inherited. Beyond this possibility, wealth generators may also be more inclined to possess or develop two attributes that are highly correlated with well-being: purpose and mastery.
Wealth generators may be more inclined to have a sense of purpose in life that is directly tied to their work, such as being passionate about their professional career, growing their business, or, more directly, focusing on generating wealth for the benefit of their family. Having a sense of purpose in life can lead to greater happiness because it gives individuals direction and meaning in their lives. When people have a clear sense of purpose, they are more likely to set goals for themselves and take action toward achieving them. This sense of accomplishment and progress can in turn lead to a greater sense of fulfillment and higher life satisfaction.
Wealth generators may also be more likely to develop a sense of mastery in their lives, such as by becoming experts in their professional careers or successful at growing and running businesses. A sense of mastery, or the feeling that one has control over their life and is capable of achieving their goals, can lead to greater happiness for several reasons. First, when people feel a sense of control over their lives, they are more likely to set and pursue goals, which can lead to a sense of accomplishment and satisfaction. A sense of mastery can also lead to greater self-esteem and self-confidence, which can positively affect an individual's overall well-being. Furthermore, the feeling of mastery can also provide a sense of autonomy and independence, which can be important for a person's sense of self-worth.
Undoubtedly, the link between money and happiness is complex and will require much more research on the topic to begin to understand its nuances. But, in the meantime, the Wealth Study offers a helpful glimpse into the world of wealth accumulation and its effect on well-being. The major takeaway from the study is the idea that money on its own may not be impactful to one’s happiness – but concepts such as autonomy, purpose, and mastery, each of which has been shown to be extremely beneficial to happiness, may all benefit from wealth generation.
At BBH we enjoy engaging with clients as they consider how to raise happy children with a sense of purpose in the presence of wealth. If you would like to learn more, please reach out to our Values-Based Wealth Planning team.
1 How Many Millionaires Are There in America? (2021, July 10). DQYDJ – Don’t Quit Your Day Job. dqydj.com/millionaires-in-america/.
2 Donnelly, G. E., Zheng, T., Haisley, E., & Norton, M. I. (2018). The amount and source of millionaires’ wealth (moderately) predict their happiness. Personality and Social Psychology Bulletin.
3 Kahneman, D., & Deaton, A. (2010). High income improves evaluation of life but not emotional well-being. Proceedings of the National Academy of Sciences, 107(38), 16489–16493.
4 Killingsworth, M. A. (2021). Experienced well-being rises with income, even above $75,000 per year. Proceedings of the National Academy of Sciences, 118(4), e2016976118
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