Happy Kids Become Rich Adults
Flipping the money buys happiness concept
If used properly, money buys happiness.
I am covering the research on money and happiness in my “Buying Happiness” series here.
I recently read a research paper that turns the table on the “money buys happiness” concept and asks ‘Do happy people end up with more money?’
Specifically, do happy kids grow up to be more financially successful?
Is money and happiness a two-way street?
A 2012 research paper pulled from a huge survey of over 10,000 people and followed from their teen years into adulthood. It's based on data collected from the National Longitudinal Study of Adolescent Health, also known as Add Health, which has gathered a wealth of information about people’s health, emotional well-being, and economic status as they grow up.
The study's objective was to explore whether a greater level of happiness during adolescence and young adulthood has a direct impact on one's financial success later in life.
This is quite an unconventional approach, as most studies usually consider the reverse—how our financial status affects our happiness. By examining life satisfaction and positive feelings like joy and hopefulness, the researchers aim to see if these good vibes during youth can actually boost your earning potential as you get older.
To ensure that the findings are robust, the researchers used a method called "sibling fixed effects," which is pretty clever. By comparing brothers and sisters from the same family, they could control for a lot of background noise like parenting style, socioeconomic status, and genetic factors.
This way, they could more confidently say that it’s really happiness and not some other family-related factor influencing future earnings.
It’s a bit like making sure that when you’re testing if a new fertilizer makes a plant grow better, you're not just seeing results because one plant was already placed in better soil. This approach helps isolate the effect of happiness itself on later income, making the study’s conclusions more convincing.
Happy kids do make more money
The study found a pretty fascinating link between how happy people felt in their younger years and how much money they ended up making later on as adults.
A one-standard-deviation increase in happiness during childhood led to a 5% increase in income during adulthood. That’s like saying that for every major bump up in the happiness scale during your childhood, you could expect a noticeable increase in your paycheck down the line.
This result suggests that the emotional well-being of young people might be more than just a nice thing—it could actually be an investment in their future financial success.
It’s as if the positivity and satisfaction you nurture during your formative years set you up with a kind of momentum that not only makes life feel better but might also enhance your career prospects and earning ability.
It’s a compelling argument for why things like mental health and happiness in schools and early life should be taken seriously—they’re not just about feeling good now; they're potentially about earning more later.
Happiness leads to greater confidence and opportunities
The research went deeper to uncover why exactly happier young people might end up making more money later on.
The researchers found several key paths that connect early happiness to later financial success.
First, happier kids are more likely to go to college and get higher degrees, which typically open up better-paying job opportunities.
Second, these happy kids also tend to get hired and promoted more frequently as adults, which boosts their career trajectory.
The researchers also looked at the personality traits associated with happier people, like optimism and extraversion and found these personality traits play a significant role in all of this.
Optimistic people tend to see more possibilities and pursue opportunities more aggressively and with greater confidence, which can lead to higher earnings.
This will be no surprise to anyone who has read my post on financial optimism:
Similarly, extroverts who are good at interacting and making connections might find it easier to secure promotions or land better jobs.
They also found that kids who displayed lower levels of stress and anxiety were able to achieve more secure and focused career advancements.
Essentially, the study suggests that the emotional health of kids doesn’t just impact their personal life but spills over significantly into their professional life, influencing their economic stability as adults.
Final thoughts
There's a pretty solid case to be made that childhood happiness isn’t just about building nice memories—it could actually mean making more money down the road.
The researchers think that being happier might help you do better in school, land better jobs, and advance in your career, perhaps because you're more positive, optimistic, and better at handling social interactions.
This isn't just about individual success either. If we take this seriously, it suggests that programs or policies aimed at boosting the emotional well-being of young people could be a smart investment for society. Improving the happiness of kids is not just about the warm and fuzzies but could also be viewed as a future investment in the economy.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.
My girlfriend tends to say we should simply love our kids. That makes them happy and sets them up for success later in life.
Interesting article Ben. Enjoyed it