Each week I join the ‘Your Money’ panel for a segment called Taking Stock, where we discuss the trending money news of the day.
- View this week’s episode
- Catch up on recaps
- Tune in every Tuesday evening at 7pm (Sydney local time) on free-to-air channel 95 and Foxtel channel 601
- Watch live here: https://www.yourmoney.com.au/watch/live/
The main question posed this week was ‘Can money buy happiness?’
It depends what you’re buying… According to McKinsey in a December 2017 piece Cashing in on the US experience economy, “Shared experiences with friends and family have a deeper psychological link to long-term intrinsic happiness than buying products does”. Another study conducted at Cornell University found that consumers’ “evaluations of their material goods went down from the time of the initial purchase to the present, but their evaluations of their experiences tended to go up, indicative of hedonic adaptation to the possessions but something quite different for their experiences.” This research suggested three potential drivers of this behavior: experiences “are more open to positive reinterpretation, they tend to become more meaningful parts of one’s identity, and they do more to foster social relationships.”
This is the very premise on which the BRG and it’s brands are built – we want to ‘shift the way people experience life’. We fundamentally believe that experiences deliver a sense of connection and belonging. Increasingly, we observe the more we ‘connect’ – via our smartphones and social media – the more disconnected we feel from the world and the experience of life around us. This is another topic we iscussed on this week’s show – (watch the full video to hear more). We’re spending less quality time with friends and family and doing those things that bring us true joy and hapoiness. Many people seem to be living vicariously through others, via screens, versus having their own life experiences. Think about how often you’re truly present and focussed in the moment with those around you. We are all guilty of it. Yet putting away our tech and stepping into the real world seems really very hard. Just for a moment consider how much time you put into planning your next trip, adventure, social gathering or ticking something off our bucket list. Is it enough when compared to the time you spend scrolling news feeds on your phone?
So it’s not surprising that numerous studies have shown when asked to rate a recent purchase on a happiness scale, experiential purchases come out on top, every time. Reasons for this are thought to be many.
- Experiences promote togetherness. As humans it’s fundamental to our sense of wellbeing to belong; to be part of a community and to connect with people. Shared experiences create moments of connection that buying a new pair of shoes could never deliver.
- Experiences create ‘memory capital’. After an experience you can call on those memories, which, much like a fine wine, actually improve wth time. Where a material purchase will eventually wear out, break or become a point of comparison to something newer, faster or shinier – memories do not.
- Experiences are unique and there’s no point of comparison. You cannot compare your personal experience to that of a friend in the same way you can compare a handbag, car or house.
- There is power in anticipation. Planning and anticipating an experience heightens the happiness payoff, as one not only gets to enjoy the experience and the lasting memories, but that wonderful lead up to the event. It’s a concept even understood by children, as showcased by A.A Milne, writer of Winnie-the-Pooh:
“Well,” said Pooh, “what I like best,” and then he had to stop and think. Because although eating honey was a very good thing to do, there was a moment just before you began to eat it which was better than when you were.”
The link between experiences and levels of happiness is real. However it’s a balancing act where the tightrope is represented by the human need for financial security. In the oft-quoted Maslow’s Hierarchy of Needs, only one step up from the basic human need for food, water, warmth and rest, is the need for personal safety and security. Financial stress and its impact on health is widely documented – nearly one in three Australians feel financially stressed at any one time, and it has damaging effects on mental and physical health. So while experiences deliver levels of happiness, create ‘memory capital’ and promote connectedness with others, we still have a very basic human need for financial security that comes first. That’s why it’s important to recognise that experiences don’t have to be expensive to contribute to overall happiness. Simply switching off the tech and spending quality time with your loved ones is enough to move the needle on hapiness. And at this time of the year, with the festive season well and truly upon us, I think that’s an experience we can all embrace.