Money can buy happiness! Just spend it on social experiences and not things, says a psychological study

Whoever said you cannot buy happiness probably wasn’t spending their money on the right stuff, it turns out. A new psychological study has found that spending money on experiences rather than material goods can foster feelings of social connection, ultimately improving one’s health and happiness.

This research, conducted by Amit Kumar, assistant professor of marketing and psychology at Texas McCombs, builds on his previous findings. Kumar's earlier work demonstrated that spending on activities like concerts, dining out, or travelling is far more satisfying than buying material items such as cars or clothes. This time, he and his co-researchers focused on how experiential purchases influence social connections.

“What this work suggests is that we might actually be able to build social capital from what we buy. That, in turn, could lead to more health and happiness,” Kumar explained.

Experiential purchases and their ability to boost connections

In collaboration with psychologists Thomas Mann of Harvard University and Thomas Gilovich of Cornell University, Kumar conducted seven varied experiments. After surveying over 1,400 participants about their feelings of social connection after making experiential versus material purchases, they found that experiential purchases were significantly better at boosting feelings of similarity and connection.

Participants were asked to rate their feelings of similarity on a scale from 1 to 9. In several separate experiments, they consistently rated these feelings up to 1.51 points higher for experiential purchases, while also reporting stronger senses of connection and kinship.

“You feel a significantly stronger sense of connectedness when you find out that you just saw the same band in concert, than when you learn you have the same shoes as someone else,” Kumar said.

One reason for these stronger connections is that experiences form a larger part of a person’s identity than material possessions. On a similar scale, participants rated their sense of identity-related to experiential purchases at an average of 7.21, whereas material purchases were rated at 5.92.

“All of our buying habits are, to some extent, part of who we are, and they can connect us to other people. But that's much more likely to be true of experiences we buy than material items we buy,” Kumar added.

The study also found that even when others have a superior version of the same experience, experiential purchases still foster a greater sense of connection than material ones — not just with friends, but with people in general. For instance, two people attending the same cricket game, one in the farthest seat from the pitch and the other in a private box, will still feel a stronger kinship than if they wore the same kind of shoes.

In two experiments, participants felt a greater “sense of connection to humanity” after reflecting on experiential purchases compared to material ones. Conversely, material purchases left them “unusually disinclined” to pursue social connections overall.

While these findings are most relevant to individual consumers and policymakers aiming to enhance health and happiness, Kumar notes there are practical implications for businesses as well. For instance, companies should consider highlighting the experiential aspects of the material goods they sell. This strategy could enhance consumers’ feelings of social connection, driving longer-term satisfaction, customer retention and brand loyalty.

The research is published in the Journal of Behavioural Decision Making and can be accessed here.