Singapore has been ranked Asia’s happiest country for the second year in a row in the World Happiness Report 2024, albeit dropping five spots to the 30th spot globally.

The ranking is based on individuals’ life evaluations, where respondents rated their lives from 0 (worst possible life) to 10 (best possible life). These life evaluation scores are influenced by six factors: Gross domestic product (GDP) per capita, healthy life expectancy, social support, freedom to make life choices, generosity, and perception of corruption.

Singapore performed particularly well in GDP per capita. Indeed, Singaporeans enjoy high standards of living and prosperity relative to its neighbours.

But some netizens are incredulous that Singapore is the happiest country in Asia, pointing to its long working hours and stressful way of life.

Our 2022 Quality of Life Survey found that Singaporeans have become unhappier since 2016. Despite median household income levels rising over those years, Singaporeans are enjoying life less and feeling a decreased sense of achievement, control and purpose.

This raises the question: Can’t money buy happiness?

Does money buy happiness?

It is important to understand the various aspects of happiness, or more broadly, the concept of subjective well-being. In our Quality of Life Survey, we examined different facets of happiness from life satisfaction, which is a more cognitive evaluation of one’s life, to the experience of positive emotions like enjoyment and achievement.

Our review of research studies has shown that the effect of income on life satisfaction is stronger compared to positive emotions.

Having more money boosts financial security and access to resources, which in turn improves the self-evaluation of one’s life. On the other hand, money does not necessarily increase positive emotions, although some studies show that money may help to reduce daily sadness or negative affect.

As income levels rise, the question of whether money can buy happiness becomes more complex.

For those in lower income brackets, money does buy what is needed for happiness in terms of covering the essential costs of living. More money reduces the unhappiness associated with financial scarcity.

But psychological perceptions of “enough” matter for people in higher income brackets. Now that their basic needs have been met, how much more money is enough?

The importance of financial satisfaction

Perceptions of financial sufficiency are crucial in the correlation between wealth and happiness. Our study found that financial satisfaction, such as satisfaction with household incomes and standard of living, is positively associated with happiness and other well-being outcomes.

This indicates that happiness isn’t correlated with just your absolute household income, but how satisfied you are with your household income.

Despite rising absolute incomes, Singaporeans have reported decreasing levels of satisfaction with their household income in three Quality of Life Surveys from 2011 to 2022.

This situation has been described as the Easterlin Paradox, a phenomenon where higher actual incomes do not always result in greater happiness. It has been observed across developing countries, transitioning countries in Eastern Europe and a large sample of developed countries.

A possible reason could be that relative incomes and income aspirations play a bigger role in wealth’s correlation to well-being. Comparing ourselves with others, such as our relatives and colleagues, can compromise our well-being because it creates pressure to keep up.

We can also be dissatisfied if our aspirations keep rising, meaning our desires exceed our needs, fuelling the competitive striving for more wealth and status.

Invest in relationships instead of material pursuits

So, what can we do to boost happiness? Our 2022 study found that those who tend to pursue materialistic values were relatively less happy and satisfied. Indeed, studies conducted in other countries have suggested social interactions and networks as integral in enhancing our happiness.

Instead of chasing after more material possessions to make us feel better, and relying on them to boost our self-worth, we should invest in meaningful relationships that may have a more profound impact on our overall well-being.

While money matters much more when one does not have enough, deciding how much is “enough” is a trickier undertaking that requires us to evaluate what we value in life.

Material prosperity is a necessary but not sufficient condition for other aspects of prosperity such as the fulfilment of social needs, having a purpose in life and enjoying personal freedom.

The article first appeared in CNA.