When Giving Makes You Happier: What the Research Means for Your Financial Plan
By Drake Richey
From a young age, most of us have heard the phrase, “It’s better to give than to receive.” The holiday season calls this maxim to mind more often than other times of the year. While it sounds nice and noble, is it actually true? The research says yes.
A recent review in a leading psychology journal looked at dozens of experiments on what researchers call “prosocial spending.” In layman’s terms, this means using your money to benefit other people rather than solely yourself. Across 15 rigorously designed experiments with large sample sizes, the authors found consistent evidence that spending on others tends to increase people’s happiness, on average, compared with spending the same money on themselves. This is an important reminder that money is not only about a return on investment, but also about a return on life.
What the Study Actually Found
In the review, psychologists Lara Aknin, Elizabeth Dunn, and Ashley Whillans analyzed experiments where people were randomly assigned either to spend money on themselves or to spend money on someone else. That could be a friend, a stranger, a charity, or another cause.
A few key takeaways on their findings:
- Giving tends to feel good. In many of these studies, people who spent money on others reported slightly higher levels of happiness or positive emotion afterward than those who kept the money.
- The results hold up under stricter standards. Earlier studies on generosity and happiness were sometimes small or flexible in their methods. This review focuses on larger, preregistered experiments, which are designed to avoid common research pitfalls. This results in more reliable findings.
- The effect is real, but not magic. The boost in happiness is generally modest, and not every study finds the same result. People are different, and not everyone experiences giving in the same way. But for many people, allocating some of their financial resources to help others can be an emotionally rewarding use of money.
When Giving Seems to Have the Biggest Emotional Payoff
The review also highlighted situations where generosity tends to feel most rewarding. Giving often feels better when:
- You are doing something real, not hypothetical.
Writing an actual check, making a real donation, or giving a real gift tends to have more emotional impact than simply imagining giving.
- You have a say in how you give.
People felt better when they could choose whom to help or how to help, rather than being assigned a cause with no input.
- You can see the impact.
When people understood how their money made a difference, for example how it helped a person, family, or community, the emotional payoff was stronger.
Turning the Research into Practice
Without a solid plan in place, your desired outcomes can be difficult to achieve, even with the best intentions. Here are some ways to translate these findings into practical generosity in your financial plan:
- Treat Generosity as a Line Item, Not an Afterthought
Rather than giving only when something tugs at your heartstrings, consider building a planned generosity budget into your overall financial plan:
- Start with an amount that feels sustainable. This might be a small percentage of income or a fixed monthly figure.
- Revisit it during your annual review, just as you would with savings and spending.
This approach helps generosity support your long-term goals instead of competing with them.
- Align Your Giving with Your Values
Because choice and personal meaning matter, it can help to ask:
- Who or what do I feel most compelled to support?
- Which issues or communities do I care about most deeply?
- Do I want my giving to be local, global, faith based, impact focused, or some mix of these?
Clarifying your values makes it easier to choose causes and organizations that feel meaningful. The research suggests that this can amplify the emotional benefits of giving.
An advisor can facilitate that conversation and help you translate values into a concrete giving strategy.
- Look for Ways to See Your Impact
Because understanding the impact of your giving seems to matter, consider:
- Choosing organizations that emphasize transparency, and share clear updates and stories about their work.
- Supporting causes where you can see results directly, for example local community efforts or charities that send regular impact reports.
- Involving your family. You might visit a charity together, volunteer, or let children help choose where some of the family’s giving goes.
These practices can deepen your experience of giving and can also create meaningful family traditions around money and generosity.
- Choose the Right Structure for Your Giving
From a planning and tax perspective, there are many ways to give, each with pros and cons depending on your situation, such as:
- Direct gifts to charities
- Recurring monthly donations
- Donor advised funds (link to previous insights post on DAFs)
- Qualified charitable distributions (QCDs) from IRAs
- Gifts of appreciated securities
The right tools for you will depend on your income, assets, tax picture, and estate goals.
How We Can Help
We don’t just ask, “How much do you want to retire with?” We also ask:
- What kind of impact do you want your resources to have on your family, your community, and your causes?
- How can we structure your finances so that generosity fits comfortably alongside your other goals?
- How can we make sure your giving is intentional, sustainable, and aligned with your overall plan?
If you’re curious about how generosity could fit into your financial picture, without jeopardizing your long-term security, this is exactly the kind of conversation we are here to have.
Important Disclosures
This article is for informational and educational purposes only. It is not intended as personalized investment, tax, legal, or mental health advice, and it should not be used as the sole basis for any financial decisions. The research summarized here describes average outcomes in controlled studies. Individual experiences will vary and there is no guarantee that charitable giving will increase your happiness or improve your financial situation.
Before making any decisions regarding charitable giving, investment strategies, or tax planning, you should consult with your financial advisor, tax professional, and, where appropriate, legal counsel.
