A comprehensive international study has revealed that individuals who feel content with their financial situation tend to report better emotional, physical, and mental well-being, regardless of their actual income level. However, when it comes to forecasting long-term changes in well-being, actual income proves to be a more accurate predictor than financial satisfaction. Published in the Journal of Personality and Social Psychology, the study emphasizes that how people feel about their finances and how much they earn each affect well-being in distinct ways.
The research was led by Vincent Y. S. Oh, a senior lecturer at the Singapore University of Social Sciences. His goal was to explore the complex connection between financial standing—both objective and subjective—and overall well-being. While the phrase “money doesn’t buy happiness” is often quoted, the link between wealth and life satisfaction has been long debated.
Earlier studies have suggested that greater income might be associated with increased happiness, but these conclusions often rely on narrow definitions of happiness or focus only on short-term impacts. Oh aimed to go further by analyzing how both actual income and financial satisfaction influence various dimensions of well-being over time.
“The question of whether money buys happiness is one that I think has great appeal to many, probably because money is such an inescapable reality of almost everyone’s lives. You see it being discussed online on Reddit and news commentaries, you hear people talk about it, you see memes about it online, and so on,” Oh told PsyPost.
He added, “More personally as well, financial pressures were also a significant part of my memories of growing up. I think our experiences of life can be shaped quite significantly by our economic and financial circumstances, and this was thus a practically important and relevant topic that was worth delving into empirically.”
Oh examined three extensive, long-term datasets from the United States and South Korea. These datasets—the Midlife in the United States Study, the Understanding America Study, and the Korean Longitudinal Study of Aging—tracked over 7,600 individuals across multiple years. Participants were repeatedly assessed to determine their income, financial satisfaction, and performance on 22 different indicators of well-being, such as emotional state, health, social connections, life satisfaction, and sense of meaning.
Income was calculated based on self-reported annual earnings, adjusted for inflation and currency differences. Financial satisfaction was gauged using straightforward questions asking individuals to rate their contentment with their financial situation. Well-being was measured through various items, including assessments of emotional experiences, physical and mental health, and life satisfaction. The research utilized latent growth modeling and meta-analysis to understand how income, satisfaction, and well-being evolved over time.
At the start of the study, those who felt satisfied with their financial situation consistently reported higher well-being across a wide range of domains. These individuals experienced more life satisfaction, better physical and mental health, and more positive emotions. The correlation was strong. In contrast, initial income levels did not consistently correlate with initial well-being levels. Surprisingly, in some instances, higher income was even linked to lower well-being when financial satisfaction was considered.
However, the pattern reversed when analyzing long-term trends. Participants with higher incomes at the beginning of the study showed better long-term improvements—or smaller declines—in emotional and life satisfaction indicators. Financial satisfaction, while clearly tied to present well-being, did not show a link to long-term improvements.
“It was interesting that although subjective financial satisfaction was clearly more strongly related to one’s current well-being, there was no evidence that it played a role in predicting future trajectories of change in well-being,” Oh noted. “Instead, income had relatively stronger evidence supporting its role as a predictor of future changes in well-being. Thus, it seems that both income and subjective financial satisfaction could matter to well-being, albeit in different ways.”
The study also looked at whether individuals with higher initial well-being later reported increased income or financial satisfaction. The answer was mostly no. Those who began with higher well-being did not necessarily go on to earn more money or feel better about their finances.
“The main takeaway is that there isn’t a single answer to the question of whether money buys happiness or whether one should be content with what one has,” Oh told PsyPost. “Money does matter in that higher-income-earners were more likely to have better future well-being, but at the same time, being subjectively happy with one’s finances played a much larger explanatory role in current well-being than how much one earns.”
Oh also addressed conventional wisdom that encourages people to completely ignore material concerns. “Any conventional wisdom that takes the form of asking people to forgo material concerns entirely is unlikely to be good advice, because ultimately, money is important to our day-to-day lives and can make a significant difference to our psychological and physical wellness. At the same time, time and again, research has shown that excessive materialism is likely to be detrimental.”
He added, “Independently of how much we actually earn, our subjective relationship with money makes a lot of difference. As much as many of us chase after material goals (and for good reason, since money does matter), we do need to moderate this pursuit and to try to cultivate some level of contentment with our finances as this may ultimately play a more significant role in our current sense of wellness. I do acknowledge, however, that this can be easier said than done.”
The study has its limitations. The average age of participants was middle-aged or older, and the financial satisfaction measure was based on only a few simple questions. Furthermore, because the study wasn’t experimental, it can’t prove cause and effect. For example, people who feel generally happy with life may also rate their finances more positively, even if those finances haven’t improved.
“The present findings do not support a direct causal inference since the studies reported are non-experimental,” Oh said. “Still, the present findings provide longer-term findings spanning over a decade, which complements some other studies reported which do support a causal role of money in well-being over shorter time frames.”
He further noted, “Additionally, the findings reported are quite comprehensive, spanning multiple well-being measures as well as participants from two relatively distinct nations (the United States and Korea). Despite this, we should be cautious of generalizing beyond what the methodology allows. There is some previous work suggesting that there are divergent relationships between money and well-being across countries, and the present findings may not generalize to all other countries equally or to other forms of well-being (e.g., meaning) that weren’t measured in the present work.”
Despite these limitations, the study stands as one of the most expansive inquiries into how money and well-being interact over time. Oh is interested in future research focusing on the finer details of socioeconomic status and its impact on well-being. This includes studying the influence of debts, caregiving expenses, and why some people are more content with their financial status than others.
“Amidst global inflationary pressures and other economic uncertainties, I think these are times where economic concerns are really critical to the everyday experiences of many people,” Oh concluded. “While the present research may offer little direct comfort, I hope they at least provide some validation of the experiences of those struggling with economic/financial concerns – money (and our subjective experience of money) does matter to our psychological and physical wellness, and such concerns should be taken very seriously and hopefully addressed by policy-makers throughout the world.”
