Learn how $10,000 spending experiments revealed the key to happiness lies in thoughtful choices—giving, experiences, and personal growth tailored to your cultural and economic reality.
Study: How spending decisions shape happiness in everyday life. Image Credit: Black Salmon / Shutterstock
A recent study published in the journal Communications Psychology investigated the emotional consequences of spending choices in daily life.
According to a recent survey, most Americans believe money can buy happiness. Consistently, evidence suggests that greater wealth is associated with more happiness. Various studies show that people derive more happiness from buying experiences, such as concerts, special meals, and trips, than from buying material things. In addition, spending money on others makes people happier than personal spending.
Further, when others observe their charitable donations, people show greater activation in the ventral striatum, a brain region associated with reward processing. However, the perception of autonomy in these decisions significantly influences the emotional outcomes, with private giving typically leading to higher happiness. Unfortunately, it is difficult to generalize conclusions from the existing literature as most studies on spending and happiness were performed in Western, educated, industrialized, prosperous, and democratic (WEIRD) countries.
The Study and Findings
In the present study, researchers assessed the emotional consequences of spending choices in a diverse sample. Two hundred participants were recruited from Australia, Brazil, Canada, Indonesia, Kenya, the United Kingdom (UK), and the United States (US). For inclusion, participants were required to have an active Twitter account and fluency in English.
Participants received $10,000 and were asked to spend it within three months. They were equally randomized to private and public conditions. In the public condition, participants could share their spending experiences with family and friends and on Twitter. In the private condition, they were asked to keep their participation private. This distinction allowed researchers to assess how public versus private sharing influenced the emotional outcomes of spending decisions, especially prosocial spending.
In addition, 100 individuals were included as controls; they did not complete spending diaries or receive money. However, controls reported their subjective well-being (SWB). Participants completed monthly surveys describing how they spent the money the preceding month and how happy they felt after each purchase.
Additionally, surveys also included measures of overall SWB, including negative affect, positive affect, and life satisfaction. At six months, overall SWB was re-assessed. Further, a spending diary was completed at the end of each of the three months, providing descriptions of all purchases made with the money, including details like what, when, why, and where.
Responses were grouped into 26 spending categories, nine of which were rarely used and were thus excluded from analyses. Happiness ratings were analyzed using random intercept multi-level models. This approach allowed researchers to control for between-person differences, such as income, gender, or personality, ensuring a focus on within-person effects. The primary aim was to assess whether each purchase type made the individual happier than all purchases in other categories. Linear regression models were used to investigate whether people who derived greater happiness from spending had larger gains in SWB over time.
Findings
Participants varied in age (21–75 years) and income ($0–$400,000). Most participants were educated, with 85% having at least a bachelor’s degree, and were liberal-leaning. Further, 53% of participants were female, 46.5% were male, and one identified as non-binary. Each participant made 16 purchases, on average, costing $565 per purchase.
The highest levels of happiness were noted for donations to charitable organizations, buying gifts, and buying experiences. Spending on personal care and education also led to greater happiness. The researchers noted significant negative interactions between the condition and the type of spending for donations and gifts. Specifically, participants in the public condition derived less happiness from gifts and donations compared to those in the private condition, highlighting the role of perceived autonomy in prosocial spending.
In addition, there were significant positive interactions between spending type and country income for buying time and gifts, meaning participants in high-income countries derived greater happiness from buying time and buying gifts than those in low-income countries. Conversely, participants in low-income countries derived more happiness from spending on housing and paying off debt. These findings underscore the varying emotional benefits of spending across economic contexts.
Linear regression models showed that participants who made happier purchases had higher gains in overall SWB at three and six months.
In addition, participants were divided into quintiles based on their happiness with purchases. Participants in the lowest quintile improved SWB by 0.31 points, while those in the highest quintile improved it by 0.78 points from baseline to three months. This difference in SWB gains was comparable to that between participants who received money and controls.
Conclusions
The findings illustrate that spending money on others and buying experiences provided higher happiness levels, consistent with prior evidence. Substantial emotional benefits were also evident from other types of spending, including personal care and education, which were not focused on in past research.
Happier spending led to greater improvements in overall SWB. Notably, the study emphasizes that spending recommendations should consider economic and cultural contexts, as the emotional outcomes of spending vary across different income groups. Notably, in low-income countries, people derive less happiness from buying gifts and buying time but more happiness from spending money on housing and paying off debt than those in high-income countries. Overall, the study provided unique insights into the emotional consequences of spending choices.
The study's limitations include a lack of global representativeness, as the sample consisted of active Twitter users fluent in English. This should be considered when interpreting the findings.