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Happy Money – Invest in Others

Spending even a few dollars on someone else can trigger a boost in happiness. Investing in other people, relationships, and issues we care about brings a host of benefits to the giver affecting not only happiness, but also health and feelings of wealth.

Research on Prosocial Spending

Spending money on others can increase your happiness even more than spending your cash on yourself according to Happy Money. One  study finds that how money is spent matters much more than the level of it. The study reports two independent experiments. The first, a survey, asked people to rate their general happiness, to report their annual income, and to estimate how much they spent in a typical month on bills and expenses, gifts for themselves, gifts for others, and donations to charity. The survey results found no support for people that spend more on themselves being happier, but did find that the amount of money people give away is a predictor of happiness.

The second experiment measured the happiness of several groups of people (and found no differences), then gave them envelopes with money and instructions on how to spend the money over the course of a day, and then measured their happiness that evening. The amounts were either $5 or $20 and notes instructed that the person spend the money on either themselves (personal) or someone else / charity (prosocial spending). Personal spending included coffee, earrings and sushi, while prosocial spend included toys for younger relatives, handouts to the homeless, and food for other people. Researchers found that the amount of money in the envelopes – $5 or $20 – had no effect on happiness, but that prosocial spending made people much happier than personal spending.

The link between prosocial spending and happiness is has been documented in global cross-sectional surveys. As happiness is good for health, it is no surprise that prosocial spending and health have been linked together as well. Older adults that provide money and other forms of support to others have better overall health – even when controlling for income and other variables.

Going Forward

If you’ve been focusing on trying to make more money, remember that giving some of it away can be just as rewarding as getting more of it. While equating time with more money makes it feel scarce, giving it away for free through volunteerism increases time affluence and all its benefits. Similarly, donating money to charity makes us feel wealthier – regardless of income or the donation amount.

Choosing a charity that directly impacts issues you care about is fast and easy. Think about the level of involvement you want to have and remember that you do not have to be limited by a single focus. Charities are but one end on a spectrum of investment options targeting financial and impactful returns.  In addition to communities and causes, prosocial spending includes gifts to friends and family. When investing in these relationships, experiences bring greater and more sustained happiness than material possessions. These can range from entertainment tickets to recreational classes and even to donations in someone’s name.

What do you think?



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