to spend (something) on means that on is the appropriate preposition here.
I would tend to use the word greater rather than larger. Simply because larger is used more often to describe physical size, though it isn't wrong to use larger here.
in respect of sounds best here from your options, but still doesn't sound natural. Perhaps you could use the phrase in terms of. :)
So spend your time and energy on people. The reward is much greater in terms of happiness.