Giving without sacrifice? The relationship between income, happiness, and giving

Abstract

Donating 10% of your income to charity might seem like a significant sacrifice, but research suggests that it might not impact your happiness as much as you think. While it’s undeniable that giving away money reduces your spending power, money itself doesn’t bring happiness. The real concern is whether donating will make you less happy than spending the money on yourself. Studies on “affective forecasts,” which examine how accurately we predict the impact of events on our happiness, reveal that we tend to overestimate the intensity and duration of both positive and negative emotions. This “impact bias” leads us to exaggerate the negative impact of things like losing a job or having a medical condition. Similarly, we often overestimate the positive impact of things like winning the lottery or getting a promotion. This bias can also influence our perceptions of the relationship between income and happiness. Therefore, donating 10% of your income may not significantly affect your happiness, and it could even bring you greater satisfaction through the act of helping others.