Personal finances encompass your entire relationship with money, that includes giving to charity. We all routinely receive requests to be charitable. Most of us probably contribute to causes we believe in, even if it’s only sporadically. According to Charity Navigator in 2014 total giving was $300 billion, or about 2% of US GDP. This is the equivalent of the GDP of all of South Africa in 2009. That’s impressive. We give so much each year that we could fund an entire country with a population of 49 million people. You can find a detailed report of what charities we give to here.
Why do we give?
Simply put, we give because it feels good to spend money on other people. Eric Baker’s article What’s one way where money definitely brings happiness? shares the psychological benefits of giving. The article describes a survey conducted by the Harvard Business Review on people’s happiness after receiving a profit sharing bonus from their company. They found that those who spent the bonus on charities or gifts for others showed increased happiness for longer than those who only spent it on themselves or bills.
Giving to others not only makes us happier, but it has a host of other benefits:
- Charity as a way of leaving a legacy
- Charity as a way of building community
- Charity as a way of providing social welfare
- Charity as a way of creating meaning in your life
- Charity as a way of creating change in the world and shaping society
- Charity as a way of showing gratitude and cultivating a feeling of abundance
I did not begin to give until I developed a budget with my mentor and she suggested I consider giving back a set percentage. Her reasoning is that over time my financial situation will improve and I will be able to give more. I started by giving 0.5% to the church I attended at the time. Just as my mentor predicted, that percentage has increased as I have paid off debt and my income has grown. I now contribute to that same church even though I no longer attend, as well as NPR, and a local volunteer organization.
I followed my mentor’s suggestion because I trusted her judgment and wanted to emulate her. Growing up my family did not contribute to charities, so this was not something I had ever thought about before. I found that giving when I felt like I had nothing to give really did create a sense of abundance in me. Even though at first I was only giving a tiny amount, I felt all of the psychological benefits.
I recently received a contribution request from a program I was a part of in college. I’ve given to them before, but this time they were asking for a larger amount and for multi-year commitments. Their request made me take a second look at my giving. I was happy to find that there is space in my budget to give more. Anyone who has ever realized that they could support something that gave to them knows how satisfying giving can be. This college program taught me how to work in corporate America and gave me the confidence to do so.
Although my family did not give routinely to charities, they did model other types of charity. I remember one instance when a man came to my grandmother’s house in Mexicali, Mexico and she had a set of clothes set aside for him. After his short visit Grandma told me he had recently been deported from the US with only the clothes on his back. He was now trying to decide whether to sneak back into the US or return home to his family in southern Mexico. Either way, his options were grim. He could risk his life to find work or he could go home and struggle to makes ends meet with his family.
In one short generation so much changed in my family. I grew up seeing poverty, but I never experienced it myself, although both my parents did. It is a miracle that my father experienced hunger as a child and that I am now at the other extreme where I can actually give back. No wonder I feel startled to realize that I now give back in a structured way with recurrent payments. Had it not been for my mentor’s encouragement, I may never have begun the practice of giving on a routine basis.
In addition to giving money we can also give time. Volunteering is a great way to build relationships and create more purpose within one’s life. In a way, giving time can be more costly than giving money. Money is a replenishable resource; you can make more of it. But time is finite. When you dedicate time to something that time can never be replaced. As a kid I was a very active volunteer because I love talking with people and being of service. Now that my life has gotten busier I’ve moved away from giving time to giving money.
An additional benefit of giving is the resulting sense of community. When we give to a cause we believe in we feel connected to it and are more likely to encourage others to check it out. This also gives us a sense of a bigger purpose in life.
When you are just getting started figuring out your personal finances, giving may seem like a distant concern. For a while you may not be able to give money or time, but you can always donate old items to charities, or at the very least you can plan to give one day. Simply imagining what you would like to contribute to will give you a greater sense of direction.
Take a look at your giving habits and determine how much you already give. You may be surprised at the amount. If you like, you can begin to grow that number or you can plan to one day grow the number. Before you do decide to give make sure that you have a livable budget. If your budget does not give you enough space to live comfortably it will be difficult to give on an ongoing basis.
Also, remember to give because you want to and can do so. Some of us may be tempted to give in order to show others that we are doing well or because we feel we should. I suggest you be very clear on your motives for giving; otherwise down the road you may even resent the organizations that you give to. Just like with everything else, moderation is key.
Do you remember the first time you realized you had enough for yourself and to give away? What was that like?