Can Money Buy Happiness?

According to new research, money can buy you happiness – but only if you spend it on someone else.

It seems lately that everyone is on a quest for happiness. Some believe a higher income will make them happier, but study after study has shown that once basic needs are met, little increase in happiness comes from a higher salary. Giving money away, however, may be just the trick. 

An article in the March issue of Science magazine covered a series of studies on spending conducted by Harvard Business School professor Michael Norton with two colleagues from the University of British Columbia. In one test, employees receiving a company bonus were surveyed about their happiness before and after the check. Those who spent a larger portion of their bonus on others experienced a greater lift in happiness; the actual size of the bonus had no impact. In another study, people were given $5 or $20 and told to spend it over the course of the day with instructions to spend it on themselves or others. Once again, those who gave the money away - regardless of whether it was $5 or $20 -  were happier than those that spent it on themselves. Key takeaway: even $5 can have an impact. 

The same effect can be seen beyond formal gifts of money. For example, according to the 2000 Social Capital Community Benchmark Survey, volunteers were 42% more likely to be very happy than non-volunteers. In 2002, the National Opinion Research Center's General Social Survey found that 43% of American adults who gave blood two to three times during the year said they were very happy versus only 29% of those who did not give blood.

What does this mean for business? Below are a few ways to potentially leverage this research with employees:

  • Allow employees to provide input into directing the company’s philanthropy (Kraft, for example, has a workplace-giving program directed by employee volunteers) 
  • Help facilitate a donation of a portion of employees’ bonuses to charity 
  • Offer employees a structured volunteer program, including paid time off 
  • Provide “Dollars for Doers” – allow employee volunteers to give grants to nonprofits based on service 
  • Encourage employees to reward one another for good works (for example, give them $5 gift cards to give to peers for performance, help on a project, etc.)

It may just lead to a happier workforce.

- Dena Pizzutti, Former Senior Account Executive


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