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We speak student!

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Personal Finance 101

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Money Can't Buy Happiness

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a la Shmoop

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So we're talking about money and happiness.

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The name of the lesson is "Money Can't Buy Happiness."

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But finding 20 dollars in your sweatpants never hurts.

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So my question for you is

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can money buy happiness?

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Boy, you know, it depends on your personality.

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It's a great question.

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The Beatles sang a lot about this stuff

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and it was easy for them to say money can't buy you happiness,

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because they had hundreds of millions of dollars.

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So it's easy for rich people to tell you,

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"Money can't buy you happiness."

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The reality is

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there's a lot of people in this country who are poor.

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They go to bed hungry.

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It's the people where money's always an issue.

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[ whoop ]

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They can't afford adequate medical care for their kids.

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They have to worry about where they go shopping for clothes.

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They have to wait for sales

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until they can buy the important things they need for their families.

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That's normal Americans. That's probably a third...

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You know, something like that. A big percentage of people.

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And so I'd rather have money and be happy.

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So at least I can control where I'm gonna live

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and what I'm gonna eat and how I'm gonna clothe my kids

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and take care of the people I love,

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because without it, you're kind of a projectile

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in today's society anyway.

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Okay, great. So another part of this lesson is talking about basically

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what money is worth, what it means.

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So why can the amount that a dollar is worth change?

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Got it. Well, you bring up two issues. One is inflation,

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historical inflation.

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And the other is what the dollar buys here

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relative to what it buys in Europe or somewhere else.

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So let me start with the first one.

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In 1960,

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an average home in California sold for about 12,000 dollars.

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And that was about the same home that today sells for about a million dollars.

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But it's the same home.

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[ say what?! ]

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And all that's happened is that wages change.

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There's been inflation of three, four percent, something like that, over the years.

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And there's this handy-dandy calculator called the "Rule of 72,"

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where you take the rate of change each year,

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divide it into 72, and that's the number of years it takes to double.

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So if you think about what a dollar buys today versus, say, 50 years ago,

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it's a fraction because we've had so much inflation.

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A carton of milk when I was a kid was ten cents.

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A carton of milk today is a couple dollars and change.

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So it's the same carton of milk, it's the same cow,

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it's the same grass, same air and everything else.

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But it just -- We print more money as a country.

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Which leads me to the second point.

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So Americans print

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money to pay our bills.

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We have all this federal and state and so on debt.

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And by printing a lot of money,

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it lets us pay off those debts easier.

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And while we print a lot of money, compared to Brazil,

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we print very little.

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So the rate of inflation

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of U.S. money that's out there in various forms

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simply accretes, or increases

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at a lower rate versus that of Brazil or other areas.

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And there are all kinds of other factors

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that affect this.

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Natural resources like oil, gold,

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Other things that a country might have that are desirable,

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including a government that people trust.

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So when there are wars

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and things that break out,

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people "retreat" to the U.S. dollar,

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and so the U.S. dollar, just because of the laws of supply and demand,

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where there's a lot of demand for a limited supply,

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the price of the dollar goes up.

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Very complicated stuff you probably don't have to know in high school

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other than the general concept.

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[ whoop ]

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Can money buy happiness?

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Why can the amount a dollar is worth change?

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[ crowd vocalizing ]

Full Transcript