The Age Happiness Puzzle: The Role of Economic Circumstances and Financial Satisfaction

Happiness and satisfaction is often found to be U-shaped in age. Using panel data from the Household Income and Labour Dynamics in Australia (HILDA) survey, this paper finds a significant age effect in life satisfaction data which appears to be robust and to reflect a genuine lifecycle effect. About half of this observed age effect is accounted for by variation in financial satisfaction. Finally, associations between income and financial satisfaction, between wealth and financial satisfaction, and between financial satisfaction and life satisfaction peak in midlife and decline thereafter. This provides strong support for the hypothesis that material concerns are key drivers of lifecycle effects in happiness and satisfaction.