Michael Norton, a professor at Harvard Business School, gave a talk at TEDxCambridge last November which was recently released online. In the talk, he explains why money can buy happiness, and what people are doing wrong when they spend money and it doesn't.
I think he's right, and I think it's a sort of undeniable truth that money does have something to do with happiness. Money affords people freedom and security, and while those things are not guarantees of happiness, a rich person who figures out how to be happy is much more likely to be able to execute their plan than a very poor person.
But Norton's talk suggests a deeper answer to why money can buy happiness. It's not really about how much money you have, although being poor has a lot of drawbacks that can stand in the way of a healthy, emotionally rewarding life. But assuming stability, what money can do is strengthen the bonds of community in your life.
We need other people to be happy. I think that almost everything we believe, in most peoples' personal philosophies, is based on the presumption that we'll be sharing our lives with other people. I think the happiest people see that as a good thing.