Lottery winners are less happy after winning a $5 million prize, says Harvard.

Michael Norton, a professor at Harvard Business School , presented studies on the relationship between money and happiness during the Sicredi Financial Wellbeing Forum. The data demonstrates that receiving large sums of money does not guarantee an increase in well-being. Norton is the author of "Happy Money – The Art of Spending Intelligently" and applies behavioral science to analyze financial health.

The professor presented research results involving lottery winners that challenge the belief that more money automatically produces more happiness, according to a report in Valor. In several cases analyzed, people who received million-dollar prizes did not register an increase in their levels of well-being. The studies indicated that radical lifestyle changes brought about by money can have negative impacts.

“We analyzed a couple who earned $5 million and they became less happy. Often people buy a new house, but then they leave the community where they were involved, where they were happy. Sometimes couples get divorced. So what matters is how that changes their daily lives,” Norton stated.

The researcher identified that the impact of money on well-being depends fundamentally on how it alters daily routines. The amount received is of secondary importance.

Differences between buying products and experiences.

Norton's research shows that acquiring material possessions, such as houses or cars, does not have a significant impact on happiness. "Eventually the roof of the house will leak, or you'll be in your beautiful new car, but stuck in traffic," he stated.

Studies indicate that investing in experiences, such as trips or special dinners, and donating to others produces more intense and lasting effects on well-being. The research identified differences between spending on products versus experiences, both before and after the expenditure.

Before making a purchase, people who buy products experience anxiety and frustration while waiting for delivery. Those planning a trip tend to feel excitement in anticipation of the experience.

After being used, products age and lose value over time. Experiences show the opposite pattern: memories become more positive as the years go by.

“That’s why, if you ask someone the following week how their honeymoon was, they’ll say it was ‘okay,’ but if you ask them one, five, ten years later, they say it was the most beautiful time of their lives, or why so many older people say that college was the best time of their lives,” Norton explained.

Projects with financial institutions

Norton's team developed projects applying the research results. In partnership with the financial management app HelloWallet , different types of messages were sent to encourage customers to open investment accounts. Messages with the text "save for your next experience" outperformed appeals such as "save to buy this or that product".

The professor worked on the issue of debt in a project with the Commonwealth Bank of Australia . The team modified the app's interface for paying credit card bills.

In the previous model, the user viewed the complete invoice and chose between paying the total amount or the minimum. In the new version, the customer can select and pay each expense individually. As the user pays for a specific purchase, such as at a coffee shop, it disappears from the screen.

“This transforms it into an 'experience,' giving the person a feeling that they've done something with that debt, that they're making progress. We even did some experiments where, when paying off a purchase within that credit card bill, it literally explodes on the screen, it's eliminated. And the results were even better,” the researcher stated.

Vancouver test on spending money on other people.

Scientists conducted an experiment in Vancouver, Canada, to test how different ways of spending money affect well-being. Two groups received envelopes containing money. One group was to buy something for themselves. The other group could only spend it on someone else or make a donation.

“At the end of the day, those who spent money on themselves weren't any happier than usual. Many people bought a coffee. For someone who drinks ten coffees a day, one more doesn't make a difference. But those who donated tend to be happier,” the researcher explained.

The research also identified practical applications for retail. In a project developed in partnership with the retail chain Crate&Barrel , customers could choose between two options after their purchase: a discount coupon for their next purchase or a voucher to make a donation to a charitable institution.

"Those who made the donation tend to say that the company better reflects their values. So this leads to more loyal customers, who will consume more there," the researcher stated.

Norton highlighted the potential application of psychology to financial behavior. "There are many opportunities for how we can use psychology to change the way people handle money, and how companies design products and services."