S$3.85 Million of Net Wealth is Needed to Join The Top 1% in Singapore: But Will it Make You Happy?
We all know that Singapore is the land of Crazy Rich Asians.
But, have you ever wondered how much you actually need to be considered one?
Well according to Knight Frank’s 2021 Global Wealth Report, you’ll need to have a net wealth that exceeds US$2.9 (S$3.85) Million to be considered the wealthiest 1 per cent in Singapore.
That got me thinking.
Does having that much money buy happiness?
Here’s what the research says.
How Much Money Does The Average Person Need to Be Happy?
Although no single piece of research can answer this question definitively, this 2018 study published by Purdue University in the field of happiness research will be quite helpful.
The researchers analysed data from the Gallup World Poll survey where a representative sample of over 1.7 million individuals from 164 countries were surveyed.
In the survey, respondents were asked to think of a scale where their best possible life would represent a 10 on the scale and their worst possible life would have a score of 0 on the scale.
They were then asked to rate their own current lives overall on that 0 to 10 scale.
FYI: This question is actually called the Cantril’s Self-Anchoring Striving Scale and is considered a more accurate and holistic method to measure happiness/subjective well-being/life satisfaction.
The researchers then studied the correlation between the Cantril ladder score and each individual’s income and found that no matter which part of the world you are from; people who earned more tend to be happier.
However, the researchers also found that there was an income satiation point.
According to the APA Dictionary of Psychology Satiation refers to:
- the satisfaction of a desire or need, such as hunger or thirst; another name for satiety.
- the temporary loss of effectiveness of a reinforcer due to its repeated presentation.
As part of Southeast Asia, the income satiation point for the average person in Singapore is an annual income of ~S$93,000 (US$70,000).
This means that when people earned more than $93,000, their happiness levels tapered off.
This could possibly be the case where any increase in income beyond this income satiation point does not have too great an effect on the person’s ability to lead a comfortable life.
In other words for the average person, more income increases overall life satisfaction but with diminishing marginal returns.
But Millionaires Might Be Happier Than The Average Person
But, there are limits to the Purdue University study.
Although the Gallup survey can be considered statistically representative, millionaires like the top 1 per cent of the richest people in Singapore are not as well-represented.
Also, the Gallup survey relies on the average person’s annual income which generally has a more restricted range than people’s net worth which can be accumulated over time and includes all assets in addition to income.
To examine this better we will look at a study done by Economics Nobel Laureates Grant Donnelly and Micheal Norton as well as Emily Haisley at BlackRock and Tianyi Zheng at the University of Mannheim.
They surveyed about 4,000 millionaires about their wealth and happiness.
For wealth, the researchers asked the respondents about their current net worth.
For happiness, they asked to rate their happiness on a 10 point scale.
They found that respondents with a net worth of about US$10 million reported that they were happier than those with a net worth of ‘only’ US$1 million or US$2 million.
More specifically, the US$10 million millionaires reported that they were about 0.25 points happier on a 10-point scale.
In other words, the research suggests that that the more money both groups had, the happier they were.
How You Made The Wealth Matters
Also, the researchers found that when they controlled for total wealth, they found that the millionaires who were ‘self-made’ and earned their wealth through means like entrepreneurship, investing etc. were slightly happier than those who inherited the wealth.
Collectively, the two main findings and the results suggest that among millionaires, the increase in happiness benefits are only significant for the super-wealthy and when the wealth was earned rather than inherited.
The studies suggest that for the average person, more income increases overall life satisfaction but with diminishing marginal returns.
But amongst millionaires who earn much more than S$93,000 a year, things might be a bit different as Grant Donelly would attest:
“So, while we’ve believed before there is diminishing marginal utility, the curve doesn’t diminish as quickly as we once thought — and even when basic needs have been met, acquiring more wealth does increase happiness.”
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