The study found that higher household income correlates with greater emotional well-being, but only up to around $75,000 a year. Beyond that, more money did not significantly increase happiness.
After earning $100,000 a year, Bernadette felt that the more money she made, the less happy she became. She later realized that spending money on the right things, like hobbies and experiences, could significantly enhance happiness.
Matt Killingsworth’s study found that more money correlates with more happiness, and this relationship continues well beyond the $75,000 annual income threshold, contradicting the earlier 2010 study.
The collaboration revealed that both studies were partially correct. Kahneman’s study measured unhappiness, showing a plateau at higher incomes for the least happy group, while Killingsworth’s data showed that for the happiest group, happiness increased significantly with more income.
For the least happy 15-20% of people, money mitigates unhappiness up to about $100,000 a year, after which it has little effect. For the happiest 15%, happiness accelerates with higher income, suggesting that money can significantly enhance happiness for those who already feel content.
Killingsworth suggests that while money can contribute to happiness, it is one of many factors. When making career decisions, such as choosing between art history and electrical engineering, considering income potential might be wise, but other factors like personal fulfillment and social connections are equally important.
People often say that money can't buy you happiness. Sometimes, if you ask them to tell you more about it, they'll mention a famous 2010 study by Nobel Prize winners Daniel Kahneman and Angus Deaton. That study found that higher household income correlates with greater emotional well-being, but only up to around $75,000 a year. After that, more money didn't seem to matter.
This was a famous study by two famous academics. The result stood for over a decade. And it feels good, right? Maybe the rich aren't so much happier than anyone else. But researchers have recently done a complete 180 on this idea. In 2021, psychologist Matt Killingsworth found nearly the opposite: That more money does correlate with more happiness. And that the relationship continues well beyond $75,000 per year.
Today on the show: Does more money mean fewer problems? Two researchers with totally different takes come together to hammer out a better understanding of the relationship between money and happiness.
This episode was hosted by Sally Helm and Nick Fountain. It was produced by Sean Saldana, Sam Yellowhorse Kesler, and Emma Peaslee. It was edited by Meg Cramer and fact-checked by Sierra Juarez. Engineering by Cena Loffredo. Alex Goldmark is Planet Money's executive producer.
Learn more about your ad choices. Visit megaphone.fm/adchoices)