Can money buy happiness?

I grew up hearing from my mother that "having abundant money will not make you happy if you are unable to maintain a healthy lifestyle." I am not sure whether the world's happiest people living in Scandinavian countries—Norway, Sweden, Denmark, Iceland, and Finland—follow what my mother used to advise me. However, evidence suggests it's not money but factors such as social security, work-life balance, high-quality institutions, connection to nature, and strong community ties that make them happier.

Yet, money is essential. Most of us are obsessed with money and spend most of our lives augmenting it. Our relationship with money begins the moment we are born and continues until we lie in the grave. Thus, one may ponder: How much money do we need to be happy? Or does money play any role, at all, in happiness?

The answer depends on a number of factors; most importantly, how do we define happiness? It is a psychologically deeper and multifaceted state typically characterised by feelings of joy, satisfaction, and life fulfilment, and it varies greatly from person to person. 

One school of thought not only believes wealthier people are generally happier but also finds an increasingly positive association between money and happiness. Gallup (a Washington-based organisation that has conducted public opinion polls worldwide since 2095) explores that the richer the country, on average, the higher the level of self-reported happiness. 

In Yes, Money Can Buy You Happiness, Charles Kelly argues that money can make you happy if you have the right mindset, while Elizabeth Dunn and Michael Norton, in their book, Happy Money: The Science of Smarter Spending, emphasise, "If your money does not bring you happiness, you are not spending it right." 

For example, being generous makes us happy. Charitable giving and pro-social spending activate the part of the brain associated with pleasure, triggering the release of happiness hormones, says Michael Norton of Harvard Business School. Nevertheless, depending on subjective human characteristics such as emotion, ego, greed, desire, and hype, not every act of spending on others makes us equally happy. 

Many British Bangladeshis, I know, spend enormous amounts of money entertaining powerful politicians and high-ranking officials from Bangladesh. When asked why, some of them honestly confess: to establish connections, buy fame, and safeguard wealth back home.

By contrast, there is a new generation of British individuals (from Bangladeshi parents) who spend their hard-earned money on divine causes, like providing clean water and promoting the life chances of autistic children in deprived areas of Bangladesh.

Meanwhile, the biggest dividend money pays is the freedom of time, choice, and flexibility. When people have more money, they have more freedom to live the life they want to live. 

In Psychology of Money, Morgan Housel explains that if you don't have control over your time, you are forced to accept whatever bad luck is thrown your way. Savings in the bank that earn 0% interest might actually generate an extraordinary return if they give you the flexibility to take a job with a lower salary but more purpose, or wait for investment opportunities that come when those without flexibility turn desperate, he continues. This freedom increases happiness by 75 percent, according to Matthew Killingsworth, a senior fellow at the Wharton School at the University of Pennsylvania. 

The lack of money, however, impacts our well-being. Scholars like Vicky Reynal, Britain's first self-styled financial psychotherapist, argue in her book Money on Your Mind: The Psychology Behind Your Financial Habits that people with substantial debt are reportedly more likely to suffer from ulcers and migraines and are six times more likely to experience anxiety and depression.

On the other hand, those who disagree with correlating happiness with money emphasise that money is just one of many factors that matter for happiness. Thus, money alone cannot determine happiness. There are unhappy individuals around us despite having enormous wealth. 

The lives of celebrity footballers, actors, and similar figures are usually not happy due to financial mismanagement, conflicts over money within the family, marital discord, and short-lived careers. An exclusive Swedish study, Long-run Effects of Lottery Wealth on Psychological Well-being by Eric Lindqvist, Robert Östling, and David Cesarini (published in The Review of Economic Studies, November 2020), found that most lottery winners see no notable improvement in happiness or mental health. 

Consider the much-talked-about Benazir Ahmed (former Inspector General of Police) and Matiur Rahman (president of the National Board of Revenue's Customs), among many other government officials, who have amassed unprecedented ill-gotten money through abusing public office. What type of happiness have they bought while the former had to escape the country with family for good and later is in hiding? What legacy and respect will they leave for their children, who may never be able to walk on the streets with dignity? 

A landmark study published in 2010 by two prominent money-happiness researchers and Nobel Prize laureates, Daniel Kahneman and Angus Deaton, shows that the mighty power of money has limitations beyond a certain point. They argue that, on average, having more money can make us increasingly happier, but only to a ceiling of $75,000 (in the context of the USA); beyond this, there is no increase in well-being. 

While the World Happiness Report 2024 identifies loneliness, lack of social support, and ageing as significant factors affecting happiness, its 2022 report summarises that the people in Scandinavian countries are the happiest in the world due to the high level of trust between citizens and confidence in their governments.

So, does money buy happiness? Well, it depends. While it can bring more pleasure to life, it is not the sole determinant of happiness. As the great philosopher Aristotle wisely opines, money does not buy happiness, but it certainly seems to help. True happiness often comes from intangible aspects of life, such as strong relationships, good health, and a sense of personal fulfilment. Therefore, the best way to buy happiness is to consider how we use our money to enrich our lives and the lives of others, instead of solely focusing on accumulating wealth. 

Ismail Ali is a London-based freelance columnist specialising in current affairs and development issues. 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.