- Spending money on others—especially close friends and family—tends to create happiness.
- Certain types of spending on ourselves—including paying for experiences and time-saving services—also foster happiness.
- Couples should aim for alignment on spending that provides value to each partner, without needing to have an opinion on the particulars of each other's purchases.
- Consider setting an annual budget for spending on items that make you happy, then check in on your progress every 3 to 6 months.
Family spending conversations can be hard to navigate during these challenging times we've all been experiencing. Money discussions present lots of opportunities for misunderstandings or resentment, in part because an expense that seems frivolous to one family member may be meaningful to another.
Focusing on happiness may help you take the sting out of family spending talks.
Consider asking whether the items in your budget really make you and your family members happy, and whether spending in other ways may make you even happier. Building the discussion around happiness can establish a shared goal for your spending and make money conversations more productive.
Of course, people can't always predict what kinds of spending will create the most happiness for them. But psychologists and economists who have studied the issue have learned a lot about the relationship between spending and happiness—and what they've learned may change the way you and your loved ones talk about spending.
The spending-happiness connection
You may have a gut sense about the possessions and experiences that bring you joy. Perhaps you think you'd get a dopamine boost if you bought a flashy new car, or took a weekend shopping trip with close friends. But would doing those things really add value to your life?
"We tend to get stuck on what researchers call a hedonic treadmill," says Andy Reed, PhD, Fidelity's Vice President for Behavioral Science. "We adapt quickly to good things that happen in our lives, so the happiness we experience can be relatively fleeting. And we start looking for shortcuts back to happiness, including spending our way there. But the reality is that material things don't provide the best bang for your buck in terms of happiness, even if they're big-ticket purchases. In fact, you could be much happier by spending less money if you spend it on the right things."
Researchers have found that using money in the following ways tends to create happiness:
Spending money on others has an especially powerful impact when you do it on behalf of close family and friends rather than acquaintances. Treating your best friend to coffee, for instance, is likely to make you happier than buying the same latte for someone you don't know as well.
Another form of spending on others is charity. Researchers have found that people tend to derive the most satisfaction from charitable giving when they can see a positive, tangible impact. In one experiment, researchers randomly asked participants whether they would like to donate to an organization that works toward broad charitable goals or one that makes a specific impact (in this case, purchasing a bed net for a child in Africa as a way to fight malaria). Those who donated to the second organization reported greater happiness.
"Helping is most likely to lead to happiness when helpers know they have assisted another person in a meaningful way," the researchers wrote.1
Spending money on ourselves—in certain ways. It's now well known that spending on experiences—vacations, outings, performances and the like—is more rewarding than buying objects. Experiences connect us to other people, especially to loved ones, and help to shape and reinforce our identities. And when we spend money on an experience rather than a material purchase, we're less likely to second-guess the decision or to compare it to the choices made by our friends and neighbors.
In a similar vein, time-saving expenditures, such as hiring a housecleaning service, create greater happiness than spending money on material objects. Researchers who studied adults in 4 countries found that time-saving purchases produced happiness at consistent rates across income levels.2
And while material purchases don't generally produce happiness, there are some exceptions. For instance, one study found that introverts derive more happiness from buying books and that extroverts are happier when going to a bar.3 Taking this finding to its logical conclusion, someone who straddles the introvert/extrovert line might find particular happiness in buying a book and reading it at a bar.
Putting theory into practice
You may be inspired to shift how you think about your family's spending. But bear in mind that real life is considerably more complex than scientific experiments, which by design focus on just 1 or 2 variables. By contrast, spending decisions within families can be complex, involving tradeoffs, compromise, and sometimes conflict.
"Often, we aren't in the habit of stepping back and thinking about how our personal spending affects other people," says Tobias Donath, who leads Fidelity's Center for Family Engagement. "So you end up arguing about a particular purchase. Another option is to share your wishes so you can deepen your understanding of each other."
Donath suggests that couples aim for alignment around wishes, rather than agreement about purchases. Doing so can help each partner understand and value the spending that makes the other happy, without needing to have an opinion about the particulars. For instance, a couple might set aside a certain annual budget for their individual spending that they only revisit if one of them has a desire to exceed it.
"Knowing you are supporting each other in fulfilling a wish creates closeness," Donath says.
Consider having that high-level conversation annually, with a check-in every 3 to 6 months. In the interim, you might use a cash management tool to track your spending. Such an arrangement may free you from getting mired in tit-for-tat disagreements about specific purchases and instead keep the focus where it belongs: on using your money to produce greater happiness.
Looking for someone to help you align your spending with what makes you and your loved ones happy? A Fidelity professional can help.
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