I work all night, I work all day to pay the bills I have to pay

Ain’t it sad?

And still there never seems to be a single penny left for me

That’s too bad.

— “Money, money, money,” by Abba 

Somewhere in America, most likely in Illinois, someone is a newly minted billionaire (or merely a multimillionaire after taxes). 

And if the people who run the Mega Millions lottery ever find that person — the one who picked the right number at a gas station in Des Plaines — Americans will once again have the idea reinforced in their heads that the infinitesimally thin chance of getting a whole lot of something for nothing is the key to happiness. Never mind that, as gobankingrates.com reported Tuesday, “The odds of winning the Mega Millions or Powerball are slim — but the odds of your life devolving into chaos if you somehow pull it off are actually quite good.”

The website cataloged the sad stories of 23 winners who ended up broke and sad, despite having become instant millionaires. 

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Not all lotto winners end up that way, of course. But the nation seems determined to ignore the notion that free money is not the answer to poverty, or that financial literacy instead might be the real road to monetary happiness.

A new study by the Harvard Business School and the University of Exeter, looked at the effect of giving handouts to low-income people and found virtually nothing to suggest that life got better, along with plenty to suggest it got worse.

The study is being used by some as a statement on the federal pandemic stimulus payments that are being blamed for stimulating inflation. But there is a larger lesson here about the need for financial education, a need that evidence suggests transcends all income levels, and about the perils of free government money.

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The study, conducted during the early pandemic months of June 2020 to May 2021, divided 5,243 Americans “living in poverty” into three groups. One group received a one-time unconditional payment of $500, another group received $2,000 and a third group, the control group, received nothing. The median normal income for participants was about $1,000 per month, not counting a little more than $500 per month in government assistance.

The upshot? The $500 group spent about $26 a day more for the first little while, and the $2,000 group spent about $82 a day more. Most of it was spent on credit cards, Paypal or Zelle, food, shopping, transportation and bills. 

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But their situations didn’t improve. “We find no evidence that the treatment decreased the prevalence of bank fees such as overdraft fees, insufficient fund fees, late payment fees, or cash advances,” the study said. “In less than four weeks, there were no observable differences between any treatment groups on bank balances (savings) or transactions.”

More importantly, those who received handouts reported being less satisfied at work, having more financial stress, getting less sleep and feeling more lonely and anxious than those in the control group.

The researchers said this may be because the groups weren’t given enough money. A $2,000 check may have been just enough to make people more aware of how much they really need.

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I’m not discounting that. Those who live in extreme poverty have little chance to put money aside or to invest, and an extra few hundred, or even a couple of thousand, doesn’t change that much. 

But even the researchers concluded “... the participants in our study who received money seemed to be conflicted about how to spend that money, suggesting that people in poverty may face difficulties not only with the ability to invest but also with the decision of how to invest.”

Wall Street Journal editorial writer Allysia Finley suggested another lesson: “... the payment made work less rewarding, which reduced feelings of personal well-being.” Also, earning money gives people “a sense of personal agency that encourages them to make better financial and health decisions.”

A lot of research has been done on the relationship between money and happiness. One often-quoted study in 2010 said happiness increases up to $75,000 a year (roughly $97,000 today), then levels off. Another study in 2018 put the number for life satisfaction at $105,000 (about $120,000 today) in North America. Another one in 2021 said there is no limit — the more you make, the happier you feel. 

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Tell that to Jack Whittaker, who won a $314 million Powerball jackpot in 2002. According to gobankingrates.com, he was generous to a fault. He gave it all away, his wife left him, his house burned down and he died 18 years later.

Clearly, there is more to happiness and financial success than being given a bunch of money.