Earning Money Makes You Happier Than Inheriting It, But Inheriting It Makes You Happy Too

Studies show that earning money makes you happier than inheriting it, which may seem like a no-brainer in some ways. Inheritance isn’t usually a happy event. It generally means someone close to you has died, so it pretty much goes hand-in-hand with grief.

It also makes sense that the sense of achievement that comes with earning money will tend to make you happier in itself.  Whether you earn that money through a specific event, like selling a business you worked hard to grow, or through working hard at your job over many years and investing wisely, it’s fair to congratulate yourself on a job well done.

I’ve inherited money, and I’ve earned it too. I’ve also read the research paper linked above, which covered two separate samples of more than 4,000 millionaires. The topic is complex, and as with so many other things, it’s not all about the money. There are some good reasons that earning money makes us happier, and they’re psychological as well as financial.

Maslow Was Right

Most of us are familiar with Maslow’s hierarchy of needs, whether from pop psychology pieces or actually studying psychology. But we don’t always talk about how closely related to money many of them are.

Physiological needs are at the bottom of Maslow’s pyramid, and basic safety and security needs are next. Needs like self-esteem and self-actualization are at the top. And all of them are, in some way, associated with money.

Earning the bare minimum is necessary for most of us to fulfil our physiological and basic safety and security needs as an adult. But the needs higher up the pyramid, like self-esteem and self-actualization, are often fulfilled by being successful in our work, which tends to lead to being successful financially as well.

Fulfilling those higher needs isn’t about the money. It’s about the feeling of purpose, achievement, and fulfilment that comes with our contributions to the world (and can of course apply to work we do that is uncompensated, such as volunteer work or family care-giving).

The types of work that allow you to earn a high income are often, though not always, the types of jobs that give you a sense of purpose and a feeling of achievement. Whether you’re building a business to be proud of or advancing in a well-respected career, a high income will often also mean you are meeting those higher needs, which will impact your happiness, perhaps just as much as the money that’s also an inevitable part of the package.

A sense of purpose, achievement and high self-esteem comes with earning your own money.

Learning to Be Rich, Slowly

There’s a reason lottery winners are often broke again within a few years of winning the lottery. The same often happens to celebrities who are suddenly catapulted to extreme fame and a very high income.

They haven’t learned to be rich. They don’t know how to spend and invest wisely, put financial plans for the future in place, or put money aside for taxes. They don’t always understand how to protect themselves and their assets from those around them who don’t have their best interests at heart.

Inheriting money tends to be slightly different. People who inherit a significant amount of money have often grown up rich and had the benefit of a better financial education, but not always.

What you learn from your parents as a child in a wealthy family, may be good money management, but it can also be the idea that money is always there and easy to come by, which may not lead to wise spending once you inherit it and have full control.

And if you didn’t grow up wealthy? But then suddenly inherit a big chunk of money? You’re often in a similar position to the lottery winners and celebrities. You don’t always know how to manage it, and you’re vulnerable to being taken advantage of by those around you.

Earning your money slowly, by your own hard work, means you slowly adapt to an increasing level of wealth, manage and protect it better, and feel more comfortable with it.

The Respect of Others

Tucked away in the middle of Maslow’s hierarchy of needs is our need for love and belonging. It is perhaps the need that seems least relevant to money and earning power. In many ways it is. But if we dig a little deeper most of us will agree that earning your own money can (among other things) mean that:

• Your colleagues respect and admire you, knowing how hard you worked to get where you are.
• Other people look up to you as a self-made person rather than dismissing you as someone who was ‘born rich’.
• You have more ‘built-in’ communities of colleagues you work with, clients you serve, people you studied or trained with, or professional organizations you’re part of.
• You have achievements and accolades you can post online and have all your friends and family members congratulate you on.

That last one might seem particularly trivial, but in a twenty-first century world, it matters. As we’ve already established, it’s not about the money. In this case it’s more about how people think about the money, and how they judge you in relation to the money.

Inheriting Money Makes You Happy Too

It’s clear that there are all kinds of advantages to making your own money, but don’t assume that inherited wealth isn’t a source of happiness, too. The studies mentioned above certainly didn’t find that all the millionaires with inherited wealth were languishing in misery.

On a ten-point happiness scale, both studies found a difference of less than one point between those with a high percentage of inherited wealth and those who had earned most of their money. Which seems to reinforce the idea that money does indeed make you happy. It’s just that the extra benefits that come with earning it — like self-esteem, a sense of purpose, and the respect of others — provide a further, and somewhat separate, happiness boost.