Want to be happy? Give your money away

Researchers from the University of British Columbia in Vancouver found that those who gave moneyto good causes were happier than people who spent their cash on consumer goods (AFP/Getty Images)

Both Bill Gates and Warren Buffett know a bit about making money – and also about giving it away to charity. Now scientists have proved that such acts of philanthropy can be a short-cut to achieving happiness.

In a study that helps explain a paradox of modern life – why increasing wealth does not necessarily make people happier – psychologists found how people spend their money is at least as important as how much of it they earn in the first place. The greatest joys of all, they discovered, can be attained by giving money away, either to someone they know or to charity.

The pursuit of happiness is seen as a fundamental human right and it is often linked with wealth, yet studies have shown that the richest countries do not always have the happiest people.

Provided there is enough money for basic needs, there appears to be little evidence to suggest that greater wealth makes people any happier, said Professor Elizabeth Dunn of the University of British Columbia in Vancouver. "Indeed, although real incomes have surged dramatically in recent decades, happiness levels have remained largely flat within developed countries across time," Professor Dunn said. "One of the most intriguing explanations for this counter-intuitive finding is that people often pour their increased wealth into pursuits that provide little in the way of lasting happiness, such as purchasing costly consumer goods."

Professor Dunn and colleagues investigated the roots of happiness in experiments that analysed the psychological emotions attached to making money and spending it on various activities.

"We wanted to test our theory that how people spend their money is at least as important as how much money they earn. Regardless of how much income each person made, those who spent money on others reported greater happiness, while those who spent more on themselves did not," Professor Dunn said.

An initial survey of 632 American men and women indicated that spending on other people was a strong indicator of general happiness, the scientists found. The study, published in the journal Science, then went on to look at 16 employees of a Boston company before they received a real bonus of several thousand dollars. The researchers interviewed the employees again between six and eight weeks after they received the money to assess their state of happiness. Professor Dunn found that a clear pattern emerged, with those employees who devoted more of their bonus to "pro-social" spending coming out higher in terms of a happiness league table.

In a final experiment, the scientists gave 46 student volunteers an envelope containing either $5 (£2.50) or $20, telling them to spend their money by 5pm either on themselves or on other people. Those who were asked to spend their windfall on others said that they felt happier at the end of the day than those who had to spend the money on themselves.

"These findings suggest that very minor alterations in spending allocations – as little as $5 – may be enough to produce real gains in happiness on a given day," Professor Dunn said.

If giving even small sums of money to others can make people happier, the question is why more of us fail to do so. "Ironically, the potential for money to increase happiness may be subverted by the kinds of choices that thinking about money promotes," she said. "The mere thought of having money makes people less likely to help acquaintances, to donate to charity, or to chose to spend time with others, precisely the kinds of behaviour strongly associated with happiness."

The researchers suggest governments may be able to improve the happiness of citizens with policies designed to promote "pro-social" spending by encouraging people to invest their income in others rather than themselves.