Acquiring a new object, like a designer handbag or car, may bring initial joy spending money on experiences elicit greater happiness. This is according to a new study conducted by the McCombs School of Business and the University of Texas at Austin.
Happiness: experiences over possessions
Assistant professor of marketing Amit Kumar, who is also the lead author of the study, revealed that consumers are happier when they spend their money on experiential purchased compared to material possessions. Their study titled “Spending on Doing Promotes More Moment-to-Moment Happiness than Spending on Habit” was published in the Journal of Experimental Social Psychology.
Studying the experiential and material groups
Kumar and team gathered 2,635 adults and these participants were randomly assigned to the experiential or material groups. During the day, study participants received random texts to monitor their purchasing behavior and emotions. The experiential shoppers dined at restaurants, went to sporting events, or took part in other experiences while the material purchasers brought items, like furniture, clothing, and jewelry. The results showed that happiness level was higher for participants who spent more on experiences than material items in each category that the researchers provided and regardless of the amount of money they spent.
The lead author said that although they thought it would be unfair to compare a trip to a shirt (possession), the result was that experiences were linked to more happiness even when they had to account for the price. Since there are different types of purchasers, a second study was conducted by the authors. It involved asking over 5,000 participants to rate their happiness first and then report to them whether they consumed, enjoyed, or used either the experiential or material purchase within an hour. If the participant answered yes, they were then asked for another series of questions and information regarding their purchases.
Still, the researchers noticed the same effect. When the person was spending on the experiential purchase, their act was linked to more happiness compared to those who choose to purchase material objects. The group added that experiences incite more satisfaction although people spend more time using the material possessions they purchased. What is the possible explanation for this? The team believes that it is because the value of the material items weakens in the long run compared to people’s memories they gained out of experiences. The study concluded that it would be wise for people to shift some of their spending habits away from material possessions and more toward experiences if they want to be happier.
Fulfilling one’s need for social bonding
American media company CNN also previously cited the findings of San Francisco State University’s assistant professor of psychology Ryan Howell, who was not involved in Kumar’s team. For Howell’s research, he looked at 154 people and asked about the purchase they made in the last three months to make themselves happy. These purchases could either be experiential or material. The author added that when people spend their money on life experiences, such as buying an extra ticket or taking someone to a certain place, it involved another person. The experiential purchase often fulfills their need for social bonding while having these experiences. They experienced increased happiness in experiential purchases because it gives them a greater sense of vitality in reflection and during the experience itself.
To do or to have
Although buying a new computer is nice, it is not going to make the purchase feel as alive as spending the money on experiences. The research raised the thought of “to do or to have.”
Consumer spending by category
Personal finance and cost of living tool HowMuch share the breakdown of the average American spending by category in 2018. Most people in the US spend their money on shelter ($11,747), pensions and social security ($6,831), food at home ($4,464), vehicle purchases ($3,975), food away from home ($3,459), health insurance ($3,405), entertainment ($3,226), other vehicle expenses ($2,859), and other housing expenses ($2,270).
Meanwhile, 1,023 respondents in the UK aged 16 to 24 were asked by database company Statista about the things that make them most happy. Most (59%) answered spending time with friends, followed by spending time with family (57%). Other answers included doing well at school or university (47%), having hobbies that they enjoy (28%), being able to support themselves (19%), enjoying their job (19%), having enough money to buy new things (18%), living a healthy, active life (18%), doing work to help other people (e.g. volunteering) (11%), shopping (4%), and others (4%).
The lasting effect of experiential vs. material purchases
Based on data provided by the Journal of Positive Psychology, the Wall Street Journal illustrated the lasting effects of experiential purchases compared to material purchases. Participants were asked if they felt their money will be or was well spent on a scale of 1 to 7, 1 meaning not at all while 7 meaning very much. Two weeks post-consumption, the average answer of material purchasers was 4.91 but it was 5.7 for experiential purchasers. Four weeks post-consumption, the average answer for material purchasers was 4.67 compared to 5.42 for experiential purchasers. This only shows the positive long-term effect of spending money on experiences rather than material objects. Perhaps, it is because people can tell a story about their experiences and not always about possessions. Another thing is that humans are social beings and we can find happiness in social experiences. This is why people spend money on travel because it makes them richer in experiences, memories, wisdom, knowledge, love, and friends.
Statista also shows leisure tourism spending worldwide amounted to US$ 1,900 billion in 2000, $1,841 billion in 2002, $2,339 billion in 2004m $2,559 billion in 2006, $3,087 billion in 2008, $3,076 billion in 2010, $3,603 billion in 2012, $3,916 billion in 2014, $3,845 billion in 2016, $4,475 billion in 2018, and $4,715 billion in 2019. Leisure tourism has also become the largest sector in the tourism industry and it generally comprises taking a vacation from everyday life or work. Travelers usually aim to visit new locations, experience new cultures, broaden their mindset, or relax, depending on the place they choose to visit.
Money can buy happiness but it doesn’t have to be physical possessions. It can be spent on experiences too, which are priceless and don’t have an expiration date. There’s also no such thing as the initial buyer’s high as memories last forever.