Does money make you happier? What the research says – and what it doesn't

Two kinds of happiness

To understand the research you need to separate two things that are both called happiness. One is how satisfied you are with your life when you think about it – life satisfaction. The other is how you feel from moment to moment during an ordinary day: joy, worry, stress, sadness – emotional well-being.

The two do not always go together. You can be satisfied with life overall and still have many heavy days, and the other way round. Much of the confusion about money and happiness comes from mixing them up.

The 75,000-dollar threshold

In 2010 the psychologist Daniel Kahneman and the economist Angus Deaton, both recipients of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, published a study in the journal PNAS. They used more than 450,000 responses from a daily survey of Americans in 2008–2009.

The result was two different curves. Life satisfaction kept rising with income across the whole scale. But emotional well-being – whether people had felt joy, worry or sadness the day before – stopped rising at an annual income of around 75,000 dollars. The title of the paper summed it up: high income improves how you evaluate your life, but not how you feel.

It was the figure 75,000 that spread. It became a number for the idea that money makes us happy only up to a certain limit.

The study that found no threshold

Eleven years later the psychologist Matthew Killingsworth published a study in the same journal with a different way of measuring. Instead of asking how people had felt the day before, he had participants answer in an app, several times a day, how they felt right then. He collected over 1.7 million such responses from 33,391 employed Americans.

Here there was no levelling off. Well-being rose at the same rate with the logarithm of income even well above 75,000 dollars. The title was a direct reply: experienced well-being rises with income, even above 75,000 dollars a year.

When the researchers joined forces

Instead of continuing to argue in separate journals, Killingsworth and Kahneman did something unusual. They entered into a so-called adversarial collaboration – a collaboration between researchers who disagree, with the psychologist Barbara Mellers as facilitator. Together they were to find an explanation consistent with both studies. The result was published in PNAS in 2023.

When they analysed Killingsworth's data again, it turned out that both had been right, about different people. Among the least happy fifth, well-being rose with income up to about 100,000 dollars and then levelled off. Among the rest it kept rising, and among the happiest it even rose faster at higher incomes.

A reasonable interpretation is that money can ease some of what makes life heavy, but only up to a point. For someone who is unhappy for other reasons – grief, illness, loneliness – money does not remove what remains.

Two things are worth holding on to. The relationship follows the logarithm of income, which means it is the percentage increase that counts: a pay rise of SEK 5,000 means more to someone earning SEK 20,000 than to someone earning SEK 80,000. And the studies show associations in American data, not that the money causes the well-being.

What I wrote in the book

In the chapter Wealth in my book Välmåendecoach (“The Wellbeing Coach”), I write that Kahneman and Deaton show there is a clear limit to how much money affects our daily well-being, and that each extra krona after it gives less and less in terms of happiness. With what we know today, that needs nuance.

The limit applied to emotional well-being, not to how satisfied people are with life, and for most people it has not held in later data. That each krona gives less the more you have is true – but that is because the relationship is logarithmic, not because it comes to an end. And the study is based on American incomes, so there is no figure from it that can be transferred to Swedish monthly salaries.

What the chapter wants to say still stands. It is about wealth being more than money: relationships, time, meaning and being able to decide over your own life. Nothing in the new research says money can replace that. It only says money is not unimportant.

Spending on others

The same chapter mentions that helping others can make us happier than buying something for ourselves. There is research pointing in that direction. The psychologist Elizabeth Dunn and her colleagues showed in 2008 in the journal Science that Americans who spent more of their money on others – gifts, charity – were happier, while what they spent on themselves was not linked to happiness. In one experiment, participants were given a sum of money to spend the same day, either on themselves or on someone else. Those randomly assigned to give were happier afterwards.

An experiment with a small number of participants is, however, a weak basis. When the same research group carried out a large pre-registered replication in 2020 with thousands of participants, the effect was there, but it was smaller than in the original, and in one of the experiments it did not appear. The reasonable conclusion is that giving can make you a little happier, not that generosity is a shortcut to happiness.

What it means for you

The research says something about averages in large groups. It says less about you. But it raises a few questions worth asking:

• What would you do differently if you had 20 per cent more each month? Is it security, time or things?
• What do you spend money on that you would not miss if it disappeared?
• What could you buy that gives you time, or that you can do together with someone?
• When did you last spend money on someone else, and how did it feel?

Money that buys security – a buffer, a bill that no longer worries you – is hard to overestimate for someone who lacks it. Money that buys status gives back less often, especially if you compare yourself with those who have more. How comparison works, and what envy is trying to tell you, is in the article on comparison and envy.

When money is a worry

For someone who has too little, the question of money and happiness is not philosophical. Financial stress can take away sleep, relationships and energy. Then reflection is not what is needed first, but help with the finances and sometimes with how you feel.

In coaching we can look at what you are chasing, what would be enough, and whether what you are working for is actually what you want. The money itself is rarely the whole question.

Frequently asked questions

Is there an income at which happiness stops rising?

For most people the research does not suggest so. In 2010 Kahneman and Deaton found that emotional well-being levelled off at an annual income of around 75,000 dollars in the US, but when Killingsworth, Kahneman and Mellers analysed new data together in 2023, the levelling off was found only among the least happy fifth. For the rest, happiness kept rising with income, and among the happiest it rose faster.

How much does money do for happiness?

The relationship follows the logarithm of income. That means it is the percentage increase that counts: going from SEK 20,000 to SEK 40,000 a month means roughly as much as going from SEK 40,000 to SEK 80,000. Each extra krona therefore gives less the more you already have, even though the increase does not stop.

Does giving money away make you happier?

In a study from 2008, people who spent more on others reported greater happiness, and participants randomly assigned to spend a sum on someone else were happier afterwards than those who spent it on themselves. A large pre-registered replication in 2020 found an effect in the same direction, but the effect was smaller than in 2008 and did not appear in one of three experiments.

Is it true that money doesn't make you happy?

Not in that form. Higher income goes together with both greater life satisfaction and better emotional well-being, on average. But the associations are averages, they are mostly based on American data, and they say nothing about what causes what. Relationships, health and meaning still matter a great deal, and money does not replace them.

The most important thing

If you take away only one thing: money is linked to happiness, but each krona means less the more you have – and for someone who is unhappy for other reasons, money runs out as a solution fairly soon.

That makes the question of what is enough more important, not less. No study can answer that question for you.

Sources

• 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. https://doi.org/10.1073/pnas.1011492107
• 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. https://doi.org/10.1073/pnas.2016976118
• Killingsworth, M. A., Kahneman, D. & Mellers, B. (2023). Income and emotional well-being: A conflict resolved. Proceedings of the National Academy of Sciences, 120(10), e2208661120. https://doi.org/10.1073/pnas.2208661120
• Dunn, E. W., Aknin, L. B. & Norton, M. I. (2008). Spending money on others promotes happiness. Science, 319(5870), 1687–1688. https://doi.org/10.1126/science.1150952
• Aknin, L. B., Dunn, E. W., Proulx, J., Lok, I. & Norton, M. I. (2020). Does spending money on others promote happiness? A registered replication report. Journal of Personality and Social Psychology, 119(2), e15–e26. https://doi.org/10.1037/pspa0000191
• Glännström, M. Välmåendecoach — För en ljusare framtid ("The Wellbeing Coach"), chapter 15: Wealth.

Best wishes, Mikael GlännströmWellbeing coach, author and father of two