Buying life experiences — such as going for vacations or going to the theatre — rather than material possessions leads to greater happiness for both the consumer and those around them, according to new study.

The study, conducted by researchers at San Francisco State University, has shown that experiential purchases result in increased well-being because they satisfy higher order needs, specifically the need for social connectedness and vitality — a feeling of being alive.

"These findings support an extension of basic need theory, where purchases that increase psychological need satisfaction will produce the greatest well-being," said Ryan Howell, assistant professor of psychology at San Francisco State University.

In the study, the researchers asked the participants write reflections and answer questions about their recent purchases. Participants indicated that experiential purchases represented money better spent and greater happiness for both themselves and others.

The results also indicate that experiences produce more happiness regardless of the amount spent or the income of the consumer. "Purchased experiences provide memory capital. We don’t tend to get bored of happy memories like we do with a material object," Howell said.

"People still believe more money will make them happy, even though 35 years of research has suggested the opposite. Maybe this belief has held as money is making some people happy some of the time, at least when they spend it on life experiences," he added.