By Atanu Biswas
Undoubtedly, money has a big impact on our lifestyles. But is happiness also a product of money? Well, over two millennia ago, in the pursuit of happiness, a prince from a small Himalayan kingdom departed from the kingdom. Thus, we never stop wondering if happiness exists somewhere beyond the monetary domain. Nevertheless, money may purchase substantial comfort—at least, to a certain extent.
Therefore, when the US financial services company Empower recently surveyed 2,034 Americans and found that 59% of respondents believed that money can buy happiness and that obtaining a certain net worth is essential to contentment, they were undoubtedly referring to a state of “financial happiness,” which may be very different from the idea of ultimate happiness as perceived by Prince Siddhartha. So, what is the threshold, or the price tag, of such “financial happiness”? It should be different in different societies and generations. Though 6 in 10 Americans believed that money could purchase happiness, significantly higher percentages of millennials (72%) and people from GenZ (67%) perceived so. And while many claim that having a large income or an ultra-high net worth is necessary for happiness, those things themselves aren’t what would make most Americans happy.
A widely-read 2010 paper by Economics Nobel Prize winners Daniel Kahneman and Angus Deaton, who won the award in 2002 and 2015, respectively, promoted the theory that there was a monetary “happiness plateau” above an annual income of $75,000 but that happiness climbed consistently with income up to that point. Of course, this was in the American context. Since then, the idea has been changed. Together, Kahneman, Matt Killingsworth, and Barbara Mellers published a collaborative analysis in 2023. According to their latest research, happiness increases with household income up to $100,000 before “abruptly” levelling out in the event of extreme unhappiness.
And for the happiest 30% of people, happiness increases at an accelerated rate beyond $100,000. But they didn’t take earnings over $500,000 into account.What are the characteristics of such financial happiness? According to Empower’s recent survey, in the American context, it might entail being able to pay bills on time, becoming debt-free, being able to afford regular modest luxuries without worrying, being able to afford experiences with loved ones, and reaching financial freedom. Generally speaking, having financial freedom allows you to begin managing your time.Financial satisfaction should, therefore, have a definite price tag. According to Empower’s survey, the average American feels that having $1.2 million is enough to make them happy. It all comes down to how much one needs to follow their passion and not worry about leading a normal life. But remember, this is an average and varies throughout generations.
According to millennials, to be happy, one would need a net worth of almost $1.7 million. Baby boomers stated that a net worth of just less than $1 million would make them happy, while Gen X-ers estimated that they would require about $1.2 million. The true outlier among the newest adult generation is Gen Z. Empower found that, on average, a net worth of $487,000 would be sufficient for their financial happiness.In the post-pandemic environment, with record-high credit card debt, a falling personal savings rate, and over half of adults living paycheck-to-paycheck, respondents told Empower that they would need to make about $284,000 annually to be happy, while the present median household income in the US is roughly $74,000. And men expect far more than women do ($381,000 versus $183,000). Annually, millennials need $525,000, Gen Z-ers need $128,000, Gen X-ers need $130,000, and boomers need $124,000 each year. While the older generation is content with less, the younger generation believes they need more.
Can these perceptions be used to quantify any key economic parameter, since the expected thresholds are far larger than the real average income, which is likely to occur? I was wondering if the perceived value of happiness, or “happy money,” could serve as a barometer for the socioeconomic standing of a society in terms of its perception about inflation, standard of living, and cost of living. In addition to the actual numbers, could these “expectations” or “perceptions,” when periodically measured, also be significant markers of the economy’s growth, along with society’s mindset?Given that India is set to become the world’s third-largest economy by 2032, what can one expect in terms of “happy money” for the average Indian? To measure such indexes, similar surveys may be required. According to this US survey, Gen Z-ers and millennials were more likely to believe that money can buy happiness. The younger generation, with Gen Z-ers as an exception, required a lot more money to be financially happy. How about India?
In the next three years, there will be 100 million Indians earning more than $10,000 a year, up from the present 60 million, according to the Goldman Sachs report “Affluent India,” which was released in January. Well, I attempted to compare the US’s “happy money” numbers in the Indian context after adjusting for PPP, and I found that $1.2 million is equivalent to roughly Rs 2.64 crore. According to a PPP comparison, Americans claimed they would need to make $284,000 annually to be happy, which translates to Rs 62.5 lakh (a whopping Rs 5.21 lakh per month!) in India. But if a careful survey is conducted, how would the matching Indian figures turn out? Furthermore, how would those Indian figures differ throughout generations and across different parts of the country? Keep guessing.Nonetheless, studying the intersection of money and happiness and the degree to which money may be used to buy contentment would go on.
Atanu Biswas, professor of statistics, Indian Statistical Institute, Kolkata. Views are personal.
