Why It’s Important For People to Know Experiences Are Better Than Possessions

August 24, 2012

The tendency for experiences to create more happiness than material possessions is one scientific finding that’s recently received a lot of attention. While most media coverage about the joy of experiences has focused on the abstract question of how to be happy, evidence is building that beliefs about materialism and happiness can also have concrete implications for a person’s day-to-day to life. For example, two recent studies have found a connection between materialism and poor money management. This means that convincing people material possessions aren’t the key to happiness won’t simply help them spend their Christmas bonus more wisely, it may also lead to better overall financial management.

The first study, which was conducted with Icelandic participants, found that not only do people who endorse materialistic values have worse money-management skills, when money-management skills and incomes are held constant a person’s materialistic beliefs can be directly linked to their amount of debt. The second study, which was conducted with American participants, built on these findings by demonstrating a link between poor money management and the specific belief that material possessions will lead to increased happiness.

The simple reason why materialism leads to poor money management is that it biases a person’s cost-benefit analysis. If a person irrationally believes a product will make them happy, they’ll be willing to pay an irrationally high (and financially unwise) price for it. The authors of the second study, Grant Donnelly, Ravi Iyer, and Ryan Howell, propose an additional way that materialism can lead to bad money management. When you believe material purchases are your path to happiness, you want to avoid anything that could stem those purchases — even if that thing is paying attention to your finances.

Thus, materialists may avoid meaningful self-monitoring of their finances because self-awareness of one’s current financial situation may encourage restraint from the acquisition of the material items they feel will reduce the discrepancy between their real and ideal selves.

Getting back to the issue of experiences vs. possessions, educating people about the value of experiences is now no longer just about making better purchases — a successful effort to downplay the joy of possessions and create less materialistic attitudes can also lead people to broadly improve their money management. Because many experiences need to be “purchased,” it’s debatable whether having an experience is inherently less materialistic than purchasing an object. There’s also the question of whether materialistic attitudes are malleable enough. Nevertheless, if teaching about the relative value of experiences is able to shift materialistic attitudes, the result won’t merely be a better purchase here or there, it may be a lifetime of improved financial decisions.

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Garðarsdóttir, R.B., & Dittmar, H. (2012). The relationship of materialism to debt and financial well-being: The case of Iceland’s perceived prosperity Journal of Economic Psychology DOI: 10.1016/j.joep.2011.12.008

Donnelly, G., Iyer, R., & Howell, R.T. (2012). The Big Five Personality Traits, Material Values, and Financial Well-being of Self-described Money Managers Journal of Economic Psychology DOI: 10.1016/j.joep.2012.08.001