Does Money Increase Self-Esteem and Happiness?

3 min read

What is the relationship between the income one earns and their self-esteem? A recent study (Bleidorn and colleagues, 2023) looked at this with the intent of answering the question of whether increased earnings increase self-esteem, or if people with high self-esteem are somehow able to earn more money.

Money is a symbol of status in Western cultures, so it makes sense that an increase in salary might lead one to feel greater self-worth. Alternatively, people with higher self-esteem might, by virtue of their high levels of confidence, seek out higher-paying jobs.

A longitudinal, four-year study looked at adults in the Netherlands, assessing their self-esteem each year as well as their self-reported income. Analysis of the data suggested that when people earn more money, it increases their self-esteem, presumably because it is associated with a sense of accomplishment, or improved social status. Furthermore, the relationship between income and self-esteem was the same regardless of the participant’s level of educational attainment, age, or sex.

Other Ways That Money Matters

Can money buy happiness? A series of studies (Matz and colleagues, 2016) suggest that the answer is “it depends.” It depends on the relationship between personality and how it is spent.

In the first study, British bank customers completed a personality measure, a measure of life satisfaction, and then their spending habits were examined. Extraverted individuals spend more money on activities like going out to a pub. People high on the trait of conscientiousness spent more on health and fitness activities and products. In addition, if the participants bought products that matched their personalities, they reported higher life satisfaction.

In a second study, participants were assessed on the personality trait of extraversion-introversion and were then offered one of two gift certificates:

  1. for a bookstore
  2. for a night at a bar

In addition, participants completed measures of positive and negative affect. Extraverts who were given money for a night out at a bar were happier than if they were given money to buy a book. The opposite was the case for introverts, they were happier with the bookstore gift certificate.

How Much Money Leads to Happiness?

Finally, the result of several studies on the relationship between income and happiness suggests that more money does indeed make people happier, but only up to a point. As people’s income approaches six figures (about $100,000 annually), happiness tends to increase. Then, however, there is a sort of plateauing so that additional income doesn’t significantly increase happiness. This suggests that having enough money to take care of basic needs leads to happiness, but that being wealthy itself does not buy happiness.

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