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Millennials prefer to spend money on experiences, which can boost happiness in several ways.
- Millennials, who prefer to spend their money on experiences, might be getting something right when it comes to their spending habits.
- Spending money on experiences can create a longer-lasting, more substantial payoff, according to financial expert Jean Chatzky.
- Experiences not only create memories and anticipation, but they can involve other people and exercise - all of which can boost happiness, Chatzky said.
Millennials are all about the experience economy.
They pay more for things such as travel, entertainment, and dining compared to their parents and grandparents, according to findings by JPMorgan. And in Fidelity Investments' 2018 Millennial Money Study, more than a quarter of respondents said that after a rough week, the thing that would bring them the most joy is some form of entertainment, such as going to the movies, happy hour, or a concert.
Turns out, they might be on to something.
"Spending money on experiences tends to have a longer-lasting and more substantial payoff," Jean Chatzky, financial editor of NBC's "Today" Show, wrote in her latest of 11 books, "Women with Money."
Here's why, according to Chatzky.
1. Experiences get better with time.
"When you experience something, you make memories," Chatzky wrote. "That allows you to go back and revisit, which brings the original burst of happiness you felt in the moment back to the fore. You may even embellish a bit and make it better than it was IRL."
Consider the influence of social media in bringing up these memories - seeing it on your timeline or reposting a #TBT rekindles those "warm fuzzies," Chatzky said.
A study conducted at Cornell University found that posting experiences on Facebook and other social media sites helps improve a person's memory, according to Digital Journal in a post syndicated on Business Insider.
Rich millennials, in particular, prioritize posting their experiences on social media, but they do so for more than just to relive the experience - they're also seeking validation.
Read more: Millennials are treating themselves to experiences - but it doesn't mean they're bad with money
2. Experiences often involve planning.
Planning your experience builds anticipation.
"When you start fleshing out the details of that upcoming trip to, say, Nashville, researching which place to go to for barbecue and which for hot chicken, figuring out who's playing in town the night you're there, you start to get excited," Chatzky wrote. "Putting the dates on the calendar gives you something to look forward to."
Just ask Justin Maiman, who's currently taking Yale's happiness class - the university's most popular class ever - "The Science of Well-Being." He learned during the course that experiences are worth investing in partly because the anticipation of the experience leads to more happiness and joy, he wrote.
3. Experiences tend to include other people.
"The social aspect of being with others is, for most, a happiness plus," Chatzky wrote.
She cited research by Michael Norton, Harvard Business School professor and co-author of the book "Happy Money: The Science of Happier Spending," who found that spending within reason to strengthen relationships is generally a good use of money.
Strong relationships are the key to happiness, Gretchen Rubin, happiness expert and author of "The Happiness Project," said in a video for Business Insider. She found evidence of a correlation between happiness, healthiness, and strong relationships - if something will strengthen a relationship, it will probably boost happiness in the long run, she said.
Watch: Happiness expert shares the one key both philosophers and scientists agree is necessary to be happy
4. Experiences sometimes involve physical activity.
According to Chatzky, spending money on exercise can boost happiness in several ways - like reducing stress.
"In the short term, exercise makes you feel better because you blow off some steam," she wrote. "In the long term, it makes you physically stronger and more able to handle whatever stresses life is throwing your way."
Even if you're not experiencing stress, Chatzky said, getting healthier can make you happier.
A 30-year-old communications specialist told Chatzky that her $250-per-month CrossFit class gave her confidence and made her feel healthier, which in turn made her happier. She found other ways to cut $250 out of her monthly expenses to afford it.
She's part of the "wellness generation" of millennials known for splurging on pricey gym memberships or $30 SoulCycle spin classes. For many, the long-term benefits they reap make the upfront cost worth it.