Does Generosity Lead to Happiness, or are Happier People Simply More Generous?

In a 2008 study of the connection between happiness and generosity, people were asked to rate their happiness while being given an envelope containing a $5 bill or a $20 bill. The participants were then randomly assigned to spend the money on themselves or spend the money on someone else by the end of the day. (1)

A second group of people in the same study were asked to predict the outcomes of the experiment. Most of the people in the second group predicted that those who spent money on themselves would be happier, and they were dead-wrong!

The group that was told to spend the money on someone else reported happier moods than those who were told to spend the money on themselves. The outcome of the research suggested "thinking about money may propel individuals toward using their financial resources to benefit themselves, but spending money on others can provide a more effective route in increasing one's own happiness." (2)

So the next logical questions would be this: "Do most people have an accurate view of the relationship between money and spending?" An even better question would be "Do you have an accurate view of the relationship between money and spending?" Yes, a new set of Beats Pro Ear Buds might provide a temporary high the first time you listen to them, but there will be no long-term impact on your overall happiness after the purchase.

In his 2008 book Gross National Happiness, Arthur Brooks addressed research that suggests increasing one's wealth is not the most effective way to improve happiness. He suggests other strategies like volunteering, generosity, working on your family life, or exploring a deeper relationship with God may be more effective at improving happiness than simply striving to get more money. (3) Additional research has shown that volunteering our time can lead to less anxiety, depression, and lowered cortisol, epinephrine, and norepinephrine levels (the stress hormones).

Multiple studies have demonstrated there is little connection between wealth and happiness. Once our basic needs are met, most data confirms that additional wealth does not lead to higher levels of happiness. (4)

If you want to improve your happiness levels, then grow your capacity to give generously. If you want to grow your capacity to give generously, a Donor Advised Fund (DAF) is one of the more powerful tools available.

Here are 5 ways a Donor Advised Fund can empower you to give more generously:

1. You become more intentional - By opening a Donor Advised Fund, you take a concrete step to make giving a financial habit. You can take the next step and automate your contributions to become a consistent part of your monthly budget or mark your calendar to revisit your annual gifting goal in the fourth quarter of each year.

2. You can be more strategic - The ministries and charities that you give to will always have needs, and there will always be some level of pressure to make a gift to the organizations you care about. But having money already set aside in your Donor Advised Fund can take some of the pressure off by giving you time to consider where you can have the greatest impact or pray for direction on which organizations should be the recipient of your charitable giving. A Donor Advised Fund can also be used to build up a balance for disaster relief or future emergency needs.

3. You can give more tax-efficiently - A Donor Advised Fund not only allows you to "stack" your giving to have the greatest impact on your personal tax return, it also allows you to donate long-term appreciated assets like stocks, real estate, or business interests. By donating highly appreciated assets, you can capture the tax deduction for the fair-market value of your gift and avoid the capital gains taxes that would be owed if you were to sell the asset and give the proceeds to charity.

4. You can engage your family in the process - With a Donor Advised Fund, you have a tangible way to invite your spouse and your children, or even your grandchildren into the discussion. By sharing the giving process with your family members, you can lay a foundation and legacy of generosity.

5. You can become a more cheerful giving! - 2 Corinthians 9 says "whoever sows sparingly will also reap sparingly, and whoever sows bountifully will also reap bountifully. Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver." A Donor Advised Fund can turn an administrative chore into a fun family experience. Most DAF custodians will allow all your giving to be done from one account on your smartphone or laptop, and track when, how much, and who you've granted to. And all your giving can come down to one simple receipt at tax time.

Being generous with our time and our money makes us happier, especially when we are free to choose where to give our resources. Whether we have millions of dollars or hundreds of dollars, how we choose to spend our money matters!

If we want to be happier and we want to bring joy to those around us, the evidence suggests that living a life of generosity is a key element in achieving that goal.

1. Elizabeth W. Dunn, Lara B. Akin, Michael I. Norton (2008). Spending Money on Others Promotes Happiness. Science 21 March 2008: Vol. 319, Issue 5870, pp. 1687-1688

2. Elizabeth W. Dunn, Lara B. Akin, Michael I. Norton (2014). Prosocial Spending and Happiness: Using Money to Benefit Others Pays Off. Current Directions in Psychological Science 2014 23:41.

3. Arthur C. Brooks (2008). Gross National Happiness: Why Happiness Matters for America - and How We Can Get More of It.

4. Ed Diener, Ed Sandvik, Larry Seidlitz, Marissa Dieners (1993). The Relationship between Income and Subjective Wellbeing: Relative or Absolute? Social Indicators Research March 1993, Volume 28, Issue 3, pp 195-223.

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