Researchers handed people $5 or $20 to spend by the end of the day, and the ones told to spend it on someone else ended up happier

Most people assume that a little extra money will make them happier if they spend it on themselves: a treat, a meal out, something they have wanted for a while. In 2008, a team led by Elizabeth Dunn at the University of British Columbia tested that assumption with a simple experiment on the streets of Vancouver.

In the study, published in Science, researchers approached people in the morning, measured their happiness, and gave each of them an envelope containing either $5 or $20. Some were told to spend it on a bill, an expense or a gift for themselves by 5 p.m. Others were told to spend it on a gift for someone else or a donation to charity.

That evening, the researchers called everyone back. The people who had spent the money on others reported feeling happier than those who had spent it on themselves. Whether they had received $5 or $20 made little difference. What mattered was who the money was spent on.

The experiment was part of a larger package. In a national survey of more than 600 Americans, the team found that people who spent more of their income on gifts for others and on charity reported greater happiness, while spending on themselves was not linked to happiness. In a small study of employees who received a profit-sharing bonus, those who spent more of the bonus on others were happier weeks later.

Perhaps the most striking part came when the researchers asked a separate group to predict the outcome. Most people guessed that spending on themselves would make them happier, and that $20 would bring more happiness than $5. They were wrong on both counts.

Later research has found similar results in many countries, including poor and wealthy ones, and even in toddlers, who appeared happier giving treats away than receiving them. The effect seems strongest when people can see the impact of their giving and when they give freely rather than out of obligation.

For everyday life, the lesson is not that you should give all your money away. It is that small acts of spending on other people, buying a friend a coffee or contributing to something you care about, may bring more happiness than an equivalent treat for yourself, and that most of us underestimate this.

There are limits. The street experiment involved a few dozen people and a single day, and later attempts to replicate some of the original findings have produced smaller effects. But the broad link between generosity and happiness has held up across many studies and cultures.

Source

Dunn EW, Aknin LB, Norton MI. “Spending money on others promotes happiness.” Science, 2008.
DOI: 10.1126/science.1150952