Advisors know well that being wealthy doesn’t guarantee happiness (just as Lennon and McCartney knew that money can’t buy you love), but it seems that there should be some correlation between wealth and happiness. Previous academic research has confirmed many of the intuitive side benefits of wealth: that high-income people tend to have better health, a higher standard of living and even better housing. Since wealth also provides the opportunity for people to engage in more activities that they find interesting or rewarding (hobbies, travel, etc.), it would seem that wealthier people would be happier people.
In research reported in the March 2015 edition of the American Psychological Association’s Psychology and Aging, Michigan State researchers Felix Cheung and Richard Lucas confirmed such a link between income and happiness.
Cheung and Lucas’ hypothesis was that “income may mean different things to people at different ages and, therefore, that the association between income and life satisfaction may vary at different points in the life course.”
The researchers conducted three national surveys, which found that as with past research in the U.S. and abroad, “individuals who earned more on average and individuals who earned more over time reported higher levels of life satisfaction. Importantly, these effects were strongest for midlife individuals (those in their 30s–50s) as compared with individuals who were younger or older.”
The researchers were looking for both the “between-person” and “within-person” association of income and life satisfaction. That is:
Whether a given person’s self-perceived life satisfaction is higher or lower than another person whose income is lower (between-person)
Whether one’s person’s change in income over time (within-person) correlates with more life satisfaction
Prior research showed a very small correlation between what we could call wealth and happiness, with some studies showing a negative correlation: Some people reported less happiness when their income increased. What Cheung and Lucas were interested in was whether there was a link between happiness and income based on a person’s age.
Prior research on this hypothesized link “typically overlooked the fact that income may play a different role in the lives of different individuals. In particular, money—and especially the income that an individual receives—may play a different role for people at different stages in their lives,” Cheung and Lucas pointed out.
It turns out that for people in their 30s to 50s, what the researchers call “midlife,” a process called “intergenerational exchanges” are at their peak. These exchanges refer to the “patterns of assistance (including but not limited to financial assistance) within a family, and exchanges can occur from children to parents as well as from parents to children.”