Video directed and produced by Joanie Tobin
In their book Happy Money: The Science of Smarter Spending, authors Elizabeth Dunn and Michael Norton draw on years of quantitative and qualitative research to explain how money can buy happiness, but only if we spend it in certain ways.
The key lies in adhering to five key principles: Buy Experiences (research shows that material purchases are less satisfying than vacations or concerts); Make it a Treat (limiting access to our favorite things will make us keep appreciating them); Buy Time (focusing on time over money yields wiser purchases); Pay Now, Consume Later (delayed consumption leads to increased enjoyment); and Invest in Others (spending money on other people makes us happier than spending it on ourselves).
Recently we featured a video illustrating the emotional benefits of buying experiences. In the following sequel, Norton again gives some cash to two women in Harvard Square. The catch this time: Each of them must spend the money on someone else.
"We've shown in our research that giving money to others actually does make people happier," says Norton, an associate professor of marketing at Harvard Business School. "One of the reasons is that it creates social connections. If you have a nice car and a big house on an island by yourself, you're not going to be happy because we need people to be happy. But by giving to another person, you're…creating a connection and a conversation with that person, and those things are really good for happiness."
Watch the video to find out how the women in Harvard Square chose to invest in others—and whether it made them happier!
HBS Professor Michael Norton presents a second challenge: take $20 and spend it on someone other than yourself. Through experiments like this, Norton and co-author Elizabeth Dunn found that giving money away makes people happier than buying things. Investing in others, as they call it, is another of the five core principles of smarter spending detailed in their book: Happy Money: The Science of Smarter Spending. For more about the book visit http://www.hbs.edu/faculty/Pages/item.aspx?num=43404
To read the full story on HBS Working Knowledge visit: http://hbswk.hbs.edu/item/7321.html