Are bank accounts a key to happiness?


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This week we celebrate International Happiness Day and the launch of the World Happiness Report, making it a perfect time to highlight the ways economic participation makes women happier. The benefits of having a bank account are well documented. People with accounts are better able to start businesses. Women who get paid into an account spend more money on their children's health and education. When faced with unemployment or the loss of a breadwinner, a savings account can be the difference between destitution and stability.  Now we can add another item to that list: owning an account can make you happier. In fact, the magnitude of the relationship between account ownership and personal happiness is roughly the same as getting married.  

If this sounds like a tricky thing to measure, it is. Here's how it’s done: First, we used data from Gallup World Poll surveys on wellbeing. Every year, Gallup researchers ask people around the world to rate their own happiness on a scale of one to ten. They also discuss their recent positive experiences (‘did you smile yesterday’) and negative experiences (‘did you worry yesterday’).

Next, we spliced Gallup's data with the Global Findex database, which tracks how many adults worldwide own accounts, save money, and make digital payments. The results were striking: We found that people who have an account or saved in the past year tend to be happier than those who do not, regardless of differences in income, age, gender, and education. And women seem to get a bigger boost than men.

The data doesn't tell us how the connection works, but it's not hard to see how having an account makes life better for women, especially in poor countries. In rural Zambia, a teacher has to shut down the schools in her village two days a month so she can make a bus trip to the capital and collect her wages in cash. This is not only costly, inconvenient, and unsafe; it steals valuable instructional time from students. Women who have their salaries wired into an account are spared this frustration.

Personality could also be a factor. For example, people who save money might be more optimistic and excited about the future. They might also get a boost in wellbeing by working towards a saving goal, like investing in education or starting a business.

Having an account and a safe place to save also gives people greater assurance, and an effective insurance, for the future and their ability to weather unemployment, medical emergencies, or death of a wage earner.

But the challenge for women is that they're less likely than men to have an account at the starting gate. Fifty-nine percent of men in the developing world have an account compared to just 50 percent of women, according to the Global Findex. The gap ranges from a low of 4 percentage points in East Asia and the Pacific to a high of 18 percentage points in South Asia, but it is significant everywhere.  And when it comes to using digital financial services like mobile money, which is linked to an account in their name, women are adopting by the millions in countries like India and Tanzania, but they still lag men globally in adopting and trying these new ways of managing their finances.

One way to close this gap is to target working women who, like the schoolteacher in Zambia, need an account for practical reasons. Women's employment is tightly linked to account ownership: In the developing world, about half of women who work for wages or are self-employed have an account. The regional leader is Latin America, where about 60 percent of wage earners are paid digitally. Much more needs to be done, however: about 300 million unbanked adults receive wage payments in cash, including 120 million women.

In addition to providing these women a safe and convenient way to receive payments, accounts would open new opportunities to save money and build credit history. Demand for appropriate savings options is widespread in the emerging world, with about 40 million unbanked women in Sub-Saharan Africa saving through informal groups or by keeping cash under the mattress. If those funds were moved into accounts, they'd accrue interest and be less susceptible to impulse spending by profligate relatives.

In countries where the right regulations and technical infrastructure are in place to support bringing low-income people into a digital financial service world using accounts, the possibilities to better smooth consumption and improve household outcomes are large. The evidence shows that when we economically empower a poor woman, she invests more in education, nutritious food and healthcare for her family.

Finally, digital financial connections between governments and their citizenry who have accounts can streamline and improve the way payments are made to and from the poor. Less leakage along the way means more money in poor peoples’ pockets. Research shows that in developing countries, digitization will add trillions of dollars to GDP that currently is floating around in unaccounted for cash transactions in the informal economy.

Digitizing payments isn't an exercise in philanthropy, as businesses have plenty of selfish reasons to abandon cash. A factory owner in Bangladesh closes his factory for two days a month just to dole out cash payments. He fills a truck with the equivalent of over $2 million worth of $5 notes, hauls it out to the factory gates, and pays his employees one by one. No doubt, paying these people into an account would make everyone happier.

This blog originally appeared in Impatient Optimists.


Neli Esipova

Director of Research, Global Migration and Regional Director, Gallup

Liz Kellison

Deputy Director, Financial Services for the Poor, Bill & Melinda Gates Foundation

Join the Conversation

Anjali Kumar
March 20, 2016

Very nice idea; interesting result. One question is, you report a positive correlation here with 'having an account' and 'saving in the past' - but there are many more Findex indicators that could perhaps even more plausibly be correlated with happiness, e.g., actually using an account, getting a loan or credit, having money to make emergency payments, sending or receiving money etc. It would be interesting to present the rest of these results at the same time, otherwise these findings beg an obvious question. If these are robust too the results could be much stronger.

Mr. Nicholas Abaitey
March 20, 2016

We are very fortunate to have found ourselves once again during this year 2016 and the very week when the International Happiness Day will be commemorated by the United Nations whilst ensuring that all honest citizens around the entire world also have a healthy, comfortable, life sustaining and sustainable livelihood which in a nut-shell enhances happiness.
Therefore having access to a mere bank account either savings or a current account does not enhance our happiness but then having access to life sustaining and livelihood sustaining academic career, employment, decent residential appartment, good marriages, honest and good companions, social security contribution and benefits coupled with all the needed incentives within our various employments with the legal systems protecting our individual, national and global interest especially regarding our good conducts and clean legal deals, then our happiness will be adequately met by our superiors without oppression and fundamental rights violations which also paves meaningful ways and augurs well for adequate productivity at our offices. Truly, such adequate measure of productivity within our offices also gives genuine happiness not for us alone us individuals but then to the institutions and the offices with work for.
Therefore I personally and directly wish you all at your life and livelihood sustaining Institution which have even embarked on a fight against poverty #End Poverty 2030 a Happy International Happiness Day with more success in all your good and excellent endeavours for sustaining humanity and especially helping the legal systems and all governments to protect and honour nuclear families which are the basic units(building blocks) of every successful nation and is a finest way of fighting poverty and alleviating poverty by the year 2030 with You and the United Nations.