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Money Buys Financial Security and Psychological Need Satisfaction: Testing Need Theory in Affluence

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  • Ryan Howell
  • Mark Kurai
  • Leona Tam

Abstract

The most prominent theory to explain the curvilinear relationship between income and subjective well-being (SWB) is need theory, which proposes that increased income and wealth can lead to increased well-being in poverty because money is used to satisfy basic physiological needs. The present study tests the tenets of need theory by proposing that money can buy happiness beyond poverty if the money satisfies higher-order needs. Findings indicate that in older adults (n = 1,284), as economic standing rises, so do individual perceptions of financial security (a safety need), which in turn increases overall life satisfaction. Further, a path model tested the degree to which financial security and psychological need satisfaction mediated the path from economic standing to life satisfaction and demonstrated the complete mediation through higher-order needs—there was a 66% reduction in the direct link through financial security and a 34% reduction through psychological need satisfaction. Discussion focuses on how these mediation and path models extend need theory. Copyright Springer Science+Business Media B.V. 2013

Suggested Citation

  • Ryan Howell & Mark Kurai & Leona Tam, 2013. "Money Buys Financial Security and Psychological Need Satisfaction: Testing Need Theory in Affluence," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 110(1), pages 17-29, January.
    • Handle: RePEc:spr:soinre:v:110:y:2013:i:1:p:17-29
    DOI: 10.1007/s11205-010-9774-5
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    2. M. Joseph Sirgy, 2018. "The Psychology of Material Well-Being," Applied Research in Quality of Life, Springer;International Society for Quality-of-Life Studies, vol. 13(2), pages 273-301, June.
    3. Thomas Gries & Veronika Müller, 2020. "Conflict Economics and Psychological Human Needs," Working Papers CIE 135, Paderborn University, CIE Center for International Economics.
    4. Ngamaba, Kayonda Hubert & Armitage, Christopher & Panagioti, Maria & Hodkinson, Alexander, 2020. "How closely related are financial satisfaction and subjective well-being? Systematic review and meta-analysis," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 85(C).
    5. Umer Mushtaq Lone & Suhail Ahmad Bhat, 2024. "Impact of financial literacy on financial well-being: a mediational role of financial self-efficacy," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 29(1), pages 122-137, March.

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