Spending on Others vs. Spending on Self

What is the best way to use money to increase happiness? Our intuition, shaped by a consumer culture, tells us that spending it on ourselves by "buying that new gadget or treating ourselves" is the direct path to pleasure.

However, psychological research reveals a surprising truth contrary to this belief: spending money on other people, in what is known as "prosocial spending," makes us significantly happier than spending it on ourselves.

Although the primitive, survival-focused brain drives us to hoard resources, the reality of our social and emotional well-being is different.

This finding challenges the notion that materialism and self-indulgence are the keys to contentment and opens the door to a more generous and ultimately more rewarding way of interacting with our financial resources.

The Evidence: From Surveys to Experiments

The evidence for this phenomenon is strong and comes from different types of studies.

First, correlational research: in large-scale surveys, people who reported spending a greater share of their income on others (gifts to others, donations to charity) also reported higher levels of overall happiness.

Interestingly, the amount of money they spent on themselves had no relationship to their happiness.

To demonstrate causality, the researchers went a step further with an ingenious experiment.

They gave a group of participants a small amount of money in the morning. Half were instructed to spend it on themselves by 5 pm.

The other half were told to spend it on someone else. At the end of the day, they measured their happiness levels.

The result was unequivocal: the group that spent their money on others felt significantly happier than the group that spent it on themselves.

Why "Giving" Feels Better Than "Receiving"?

The psychology behind this effect is fascinating.

Spending money on ourselves often just feeds the "hedonic treadmill"; the thrill of the new purchase is fleeting and we quickly adapt to it, returning to our previous level of happiness.

In contrast, prosocial spending has deeper and longer-lasting benefits.

First, it strengthens our social connections. Giving a gift or inviting someone to lunch is an act that builds and strengthens bonds with others, which are a major source of happiness.

Second, it improves our self-image. It makes us see ourselves as generous and caring people, which is gratifying.

Finally, it gives us a sense of impact and efficacy, seeing how our action has a positive effect on another person or a cause we care about.

These psychological benefits are far richer and more sustainable than the temporary pleasure of a new possession.

Try It Yourself! Practical Ideas for Prosocial Spending

You don't need a big budget to start experiencing the benefits of prosocial spending.

In fact, other studies have shown that the amount of money spent is not as important as the act of giving itself.

Here are some practical and simple ideas:

The pending coffee: Next time you're in line at a coffee shop, offer to pay for the coffee of the person behind you.

The unexpected gift: Buy a small gift, such as a flower or a chocolate bar, for a friend or co-worker, just "because".

The anonymous dinner: