By: Neil Mrkvicka​

There appears to be a growing trend in the employee benefits world of organizations providing financial wellness education. Their goal is to increase the financial savings and security of their workers because they tend to view happier, less-stressed employees as better workers (i.e., financial savings→ a sense of security→ a happy/low-stress/productive worker).

Take a look at some of the interesting research findings authors  Elizabeth Dunn (University of British Columbia psychologist) and Michael Norton (Harvard Business School) unearth in their book, Happy Money: The Science of Smarter Spending,  and consider whether your workers could benefit from any of the recommendations.


In Happy Money, Dunn and Norton discuss a wealth of scientific research on spending behaviors and explain how to get the biggest happiness bang for your buck.

Realize money can buy only so much happiness. New research shows that greater wealth often fails to provide as much happiness as many people expect. In a national sample of Americans, individuals thought that if their income would double, their satisfaction with life would also about double. But the data reveals that people who earn $55,000 are only 9% more satisfied than those making $25,000. Around the world, income has shown to have surprisingly little influence on whether people smile, laugh and experience enjoyment on a typical day. However, what we do with our money can dramatically impact happiness.

So what should we do with it . . .

Address your debt. Nearly one-third of credit card users report carrying a balance rather than paying off their cards at the end of the month, and almost half of U.S. residents report worrying about their debts. While the relationship between income and happiness is weak, the relationship between individuals’ happiness and whether they have difficulty paying their bills is quite strong. In other words, what we owe is a bigger predictor of our happiness than what we make. The authors suggest the happiness boon of paying off debt may be greater than just about anything else you could do with your money.

[Related: Credit Terms You Should Know]

Once the debt is paid off, consider . . .

Charitable donations and prosocial spending. Researchers have found the more people invested in others, the happier they are. Amazingly, whether an individual partakes in prosocial spending is as great a predictor of happiness as income. Indeed, giving money away can be just as rewarding as getting more of it. This finding rang true across the globe. In the Gallup World Poll, donating to charity had a similar effect on happiness as doubling household income.

That’s great, but how should I spend my money on ME, you ask?

  • Spend on experiences not materials. In study after study, people are in a better mood when they reflect on experiential purchases, which they commonly describe as “money well spent.” More specifically, people who spend more money on leisure (e.g., trips, movies, sporting events, gym memberships, etc.) report greater satisfaction with their lives. Not surprisingly, the amount the average adult actually spends on leisure is dwarfed by the amount he or she spends on housing, but housing turns out to have zero bearing on life satisfaction. Research shows that when looking back on past decisions about whether or not to purchase experiences, 83% of people report their biggest regret was passing up an opportunity for an experience. The opposite was true for material goods—Most people’s biggest regret was buying something they wish they hadn’t. Experiences provide more happiness because they are more likely to make us feel connected to others. Given the central importance of relationships for human happiness, the authors argue anything we can do to make experiences with our friends and loved ones special is money well spent.
  • Focus on how you spend your time. How we use our time can have a big influence on our happiness. Research suggests that people with more money do not spend their time in more enjoyable ways on a day-to-day basis. Wealthier individuals tend to devote more time to activities associated with relatively high levels of stress, such as shopping, working and commuting. In order to maintain current happiness levels, the average person would need their income to rise by over a third to offset the costs of adding 22 minutes to their commute. Rather than asking the boss for a raise, workers could get a similar happiness boost by moving closer to work. To get more happiness, the authors suggest thinking about how to use money to buy more time rather than using time to get more money.
  • Delay it and savor it (but don’t make it a habit). Research has shown vacationers exhibit a bigger happiness boost in the weeks prior to their trip rather than the weeks afterward. People generate even more emotional images of Christmas and New Year’s when they imagine these events in November than when they look back in January on their actual experiences. Paying now and consuming later can help us take the long view, turning us into not just better consumers but also better stewards of our well-being. For instance, when people pay for groceries with cash rather than cards, they are less likely to make unhealthy impulse buys. Money increases our happiness by giving us access to all kinds of wonderful things, but this access undermines our happiness by reducing our tendency to appreciate life’s small joys. Scarcity may be our best ally to appreciation (hence, don’t make it a habit). For instance, the authors suggest that merely recognizing an end is near can hold a key to happiness, helping us to turn readily available comforts into treats (e.g., McDonald’s McRib).

Reading this book made me wonder—If the true end goal of many organizations’ financial education initiatives is to reduce stress and boost happiness, would organizations consider going beyond the savings mantra to provide guidance on spending?

Beyond providing this information, how can organizations capitalize on this type of research? Happy Money describes how forward-thinking companies are implementing strategies to enable employees to reap more happiness:

  • Bonuses in the form of a trip or experience (e.g., a trip to Costa Rica for successful middle managers and their spouses). Google’s vice president of people operations suggests the trip bonus is worth up to ten times the cash value for these employees and provides a better value for the overall organization.
  • Benefits that free up time (e.g., vacation, on-site clinics, on-site fitness facilities, flexible work schedules, sabbaticals, etc.). Companies like 3M are known for giving employees a percentage of their work time for creative, autonomous projects.
  • Sponsoring or supporting charitable events can be a great way for organizations to increase engagement and happiness among workers. Google goes even further, providing employees with opportunities to give not only to charitable causes, but to one another. The company has a special fund from which employees can draw to gift up to $150 at a time to any other employee. Google’s research shows that this small bonus is more effective and makes people happier than a cash-based award from a manager or executive. Additionally, a study on sales performance incentives has shown that sales teams given prosocial bonuses to spend on each other outperform teams where members receive traditional bonuses to spend on themselves. The authors conclude that providing employees with bonuses used for prosocial actions toward charities and co-workers offers a novel and potentially profitable way to reward workers.

Happy Money is an eye-opening read that gives pause to traditional beliefs that tie money to happiness. It could pay for employers to step back and assess whether incentives designed to make employees happier are accomplishing that goal. The key to happiness may be more simplistic than we think. 

The International Foundation offers resources to help you motivate plan participants to actively engage in their financial wellness. Visit our Financial Wellness and Retirement Security Resources for news and research, success stories, tools for learning and more.

Neil Mrkvicka

Senior Research Analyst at the International Foundation

Favorite Foundation service/product: Our member surveys!

Benefits-related topics that catch his attention: Health & wellness, financial wellness/security, behavioral economics/psychology

Favorite Foundation moments: Foundation research survey release days.

Personal Insight: He’ll easily get lost in a good economics book or statistical analysis, but quiet Neil lives life out loud—give him an athletic competition, a new adventure or a chance for a good laugh and he’s there.


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