There’s an old saying, “Money can’t buy happiness,” but for Millennials, it’s more like “Money won’t disappear, it just turns into things you love.” We may not have enough money, but there are countless things we love to choose from. Which choice will bring us the greatest happiness?
We Just Don’t Have Enough Money
As we already know, earning money is still a goal to prepare for a livable retirement. And in another discussion, we learned that being wealthier might make you happier, but it’s only statistically significant, with an effect size so small it’s negligible. Therefore, to enhance happiness, it may be more effective to think about “how to spend money efficiently to feel happier” than to just earn more. Here’s a typical challenge we might face in daily life:
With a budget of 20,000, it’s enough to buy an ultra-thin portable laptop or to have a travel experience in Japan. Which one should I choose to maximize my happiness?
These two choices can be divided into two different types of expenditures:
- Material Purchase: Physical items that can often be used repeatedly. For example, clothes, watches, furniture, cameras, mobile phones, and other electronic products.
- Experiential Purchase: Activities involving experiences that usually do not recur. For example, outdoor activities, traveling, concerts or movie entertainment, dining, etc.
To understand the impact of these two different types of spending on happiness, Kumar, Killingsworth, and Gilovich (2020) analyzed participants’ reported feelings of happiness at various moments and inquired about their purchasing activities before the interview. In terms of spending statistics, the researchers found:
- With roughly equal proportions of survey responses, 52% reported a material purchase, whereas only 18% reported an experiential purchase. Experiential purchases occur far less frequently than material purchases.
- On average, each material purchase costs USD$1,126.91 (about TWD$33,780). In contrast, each experiential purchase costs only USD$373.60 (about TWD$11,208), roughly one-third of material purchases in terms of expense.
Spending on Experiences is Better than Spending on Possessions
Which is more pleasurable, material consumption or experiential consumption? The result is: The happiness derived from experiential purchases far exceeds that from material purchases, for every single item.
Adapted from Kumar, Killingsworth & Gilovich (2020). It can be seen that all experiential purchases report higher happiness than material purchases.
The greatest joy appears to come from outdoor activities and experiential experiences. Traveling, entertainment, and dining bring a significant amount of happiness. In comparison, the happiness from buying clothes or furniture is much less than that from experiential purchases. The worst is electronic products: their costs are high, but the joy they bring is minimal. Considering the researchers’ observation of the frequency of material versus experiential consumption, people are at a loss—we spend almost nine times as much (material purchases occurring three times more than experiential purchases and costing three times as much) and get so little happiness. The researchers conclude:
For consumers, spending on experiences is far better than spending on possessions. (Consumers are better off spending on doing than having.)
The Difference Lies in Generating Psychological Meaning and Connection
But what makes experiential purchases different from material purchases that make us feel happier?
- Firstly, most material purchases are instrumental. In modern life, going out without a phone and missing instant messages and contacts can be quite troublesome, right? Hence, a forty-thousand-dollar iPhone provides the value of accessing information and staying connected. This type of functionality might reduce negative emotions rather than provide positive happiness.
- Secondly, these material purchases can often be reused. One argument is: The happiness from buying a phone should be the total happiness from using it repeatedly over three years. The research cannot refute this claim since the happiness measure immediately followed the purchase rather than a retrospective evaluation of overall value. However, this argument doesn’t explain why experiential purchases yield greater happiness.
- Lastly, experiential purchases are often self- and socially-oriented. For example, attending music festivals and listening to favorite bands reinforce self-identity with the love of music. Meeting like-minded people and developing friendships strengthen peer connections. Or going on a trip with people you like and sharing interesting experiences, forming interpersonal connections that are often psychologically meaningful, something that material purchases cannot provide.
With this in mind: If a material purchase can lead to many experiences and has psychological significance, the happiness created might be even greater. A few years ago, I bought the cheapest full-frame camera with all the money I had at the time; subsequently, over the years, I added some tripods and several lenses for use during trips. This camera has added a lot of happiness in the ensuing years: setting it up, shooting, and the unexpected events that occurred in the process left memories, extending the experiences. We printed our photos and placed the most memorable ones on our travel map.
If the videos watched are related to self-worth or watched together with others, the assessed happiness might even exceed that of productivity. However, these considerations stem from having only one sum of money, a constraint for those without much money. If there were more money, the answer would probably be just one: children only choose one—I want them all.
Conclusion
- Overall, experiential purchases provide more happiness than material purchases. If there is only a set amount of money to spend on achieving greater happiness without considering productivity, experiences like travel, entertainment, and fine dining are likely to be more valuable than buying clothes, furniture, or high-end electronics.
- Experiential purchases result in greater happiness from the experience itself, shared experiences with others, connections to interests, values, and self-identity, and community participation. If a material purchase can also bring such experiences, it might be worth the investment.
References
Kumar, Killingsworth & Gilovich (2020). Spending on doing promotes more moment-to-moment happiness than spending on having. Journal of Experimental Social Psychology, 88.
