It's that giving time of year! We spend a little more time thinking about charity this time of year. Part of that is due to the holidays, part of it is due to the tax year coming to a close (since many donations are tax-deductible), and part of it is simply due to the natural reflection on how we've done for the year. In today's post, I'm going to share a few thoughts I have about giving.
Charitable Giving Is Work
First of all, it is important to note that effective giving is work. Just like earning, saving, investing, paying taxes, and even spending, it takes work to give well. For many people, it's all about the efficiency of the charity. They want to see as high a percentage as possible of their donation going directly to helping others. There are many “charity rating” online resources that can help you in this endeavor.
For others, it's about the effectiveness of the charity. How much good can that charity do with a few bucks? It turns out that high-yield interventions in very poor places in this world do more good than a lot of what can be done locally.
Still others prefer to act locally, by giving to local food banks, homeless shelters, free clinics, soup kitchens, and the like. Deciding which of these matters most to you and deciding on the individual charities you are going to give to is a lot of work. You will also need to decide whether to give a few large gifts or many small ones. You can just do what is convenient (i.e., give to those who ask you to give), but I suspect you will enjoy the process more if you spend some time and go through the process in a more deliberate manner.
Get Kids Involved
If giving is an important part of your life, chances are charity is a habit you want to pass along to your children. Get them involved in the process. In December, we meet as a family and choose the charities we will donate to each year. Although Katie and I have met in advance as a couple and decided HOW MUCH we're going to give, we go into this meeting open-minded and let the kids have just as much say as we do in who gets the money.
More information here:
You Want to Start Donating to Charity? Here’s How to Find the Motivation to Actually Do It
How Donating to Charity Is a Tax Advantage
‘Giving' Doesn't Just Mean ‘Charity'
We have tried to view giving in a wider scope than just giving to charity. We are guided in this by some of our religious views. Our religion teaches that:
“. . . ye shall obtain riches, if ye seek them; and ye shall seek them for the intent to do good—to clothe the naked, to feed the hungry, and to liberate the captive, and administer relief to the sick and afflicted.”
But it also teaches us that:
“. . . if any provide not for his own, and specially for those of his own house, he hath denied the faith and is worse than infidel.”
There are a couple of lessons there. First, moderation in all things. You don't need to give to the point where you are impoverished and can't feed your kids. But second, you can give both to charity and to “your own,” however you define that. We have started 529 accounts for all 32 of our nieces and nephews—at least those who have provided us with their children's Social Security numbers. Some of their parents have their own 529s, and some don't. But a few years back, we decided to make even larger donations than usual into each of these accounts. We see this as a way to take care of our own.
Another way we give that really isn't charity is The White Coat Investor Scholarship, where we give away tens of thousands of dollars to professional students every year. Obviously, we get some marketing value out of that (and you can be assured we really emphasize that to the IRS), but there is no way we're getting as much marketing value as we're spending on it. It's not a great business decision. But it is a great way for us to pay it forward. The Financial Educator Award and the WCI Champions program also represent similar giving. Paying unexpected bonuses to your employees or sending money to family are other methods of non-charitable giving you might want to consider.
Time or Money
Time is money and money is time, at least to a certain extent. But they're not completely fungible. I think Warren Buffett said something to the effect of being willing to give up all his money to be young again. But there are times in life when it is easier or better for you to donate your time, and other times when it is easier or better to donate your money. Obviously, you can do both in whatever combination works for you.
It's Not a Tax Play
I occasionally run into someone who doesn't understand how tax deductions work. Sometimes they're criticizing givers as just trying to get out of paying taxes. But other times it is someone who is asking, “How can I lower my taxes?” When somebody suggests giving some money to charity, they realize how deductions work. If you give $100 to charity and your marginal tax rate is 35%, you get, at most, $35 off your taxes. Paying $100 for $35 worth of a tax break isn't a particularly good financial move unless you were going to give the money away anyway. Some people can't even use the deduction since they take the standard deduction. Just recognize that you're not going to have more money AFTER you donate to charity.
Taxes Aren't Charity
While we're on the subject of taxes, it's probably worthwhile to point out something that I see as obvious but which many are confused about. Paying taxes is not charity. Taxes aren't voluntary. You see, you either pay them or you go to prison with Wesley Snipes and Leona Helmsley. While I'm proud of what my tax dollars do and I pay every dollar I owe, I'm not going to leave a tip.
Now, I'm no Libertarian. I'm not trying to shrink the government to the size where it can be drowned in a bathtub. But I'm of the firm belief that there are some things that government does best, some things that charity does best, and some things that business does best. Mixing those up often leads to inefficient solutions. If you don't want to give to charity, that's fine. It's your money. The great part about charity is that it is voluntary. But don't justify it by saying you pay lots of money in taxes. Charity is about making a choice, and there is no choice when it comes to taxes.
Charity at Death Isn't Really Charity
While I'm ranting, let me just point out that leaving your money to charity when you die is a good thing, but in many ways, you're really leaving your heirs' money to charity. It doesn't hurt you a bit to give it away at that point. “But I might need it,” you say. That's exactly the point. Charity is giving away something you might need. For similar reasons, I recommend you start a giving program long before you are financially independent, much less dead. Using a Donor Advised Fund can be kind of similar, since you get the tax deduction, but the charity doesn't actually get the money. We have run a pro/con post debating this very point. While I love the anonymity and convenience our DAF provides, be aware that you haven't done any good until you distribute from the DAF, even if you already got the deduction.
More information here:
2026 Changes to Charitable Giving Tax Deductions Due to OBBBA
How to Give Away Money Better (Instead of Tithing)
It's Not Just for the Charity
When I give to charity, I think that it does me at least as much good as the charity. It helps me to avoid being miserly. It helps me avoid a visit from the ghosts of Christmas past, present, and future. It helps me to fight off that subconscious voice saying:
“You don't have enough.
You need more.
What if . . .
You'll never have enough.”
I think giving away a significant amount of money sends messages to those subconscious voices, and those messages are:
“If I can give this much, I must be well off.
I have enough and to spare.”
Giving makes me less selfish and less greedy. It makes me worry about money less. It makes me feel richer. It helps me stay connected to those less fortunate than myself. It provides perspective. Instead of worrying about whether a 3.7% safe withdrawal rate or a 3.5% safe withdrawal rate is best, I focus on those who are hungry, ill, and inadequately clothed. Want to know if you have “enough?” Give some money away. You'll be amazed at what that does to keep your “enough” number from skyrocketing.
In addition, giving money away makes sure you're not working more than you actually want. Let me explain. When you're giving away a big chunk of money, you know that a big chunk of the work you do is not actually for you. So, if you don't really want to do it, you'll stop and go do something you want to do. It combines with your self-interest to muzzle your workaholism.
It's an American Tradition?
Philanthropy and volunteerism are somewhat unique to Americans, and it's one of the things I love about this country. We may be greedy capitalists, but the most capitalistic among us have set some impressive examples of philanthropy.
Andrew Carnegie isn't remembered so much for his steel empire as for the >2,000 libraries he founded. He gave away over 90% of his wealth before he died. He said, “The man who dies rich dies disgraced.” Will Bill Gates be remembered more for Microsoft or for the Gates Foundation and the work it does? Warren Buffett, who has already given away $60 billion of his $169 billion fortune, said, “If you're in the luckiest 1% of humanity, you owe it to the rest of humanity to think about the other 99%.” Guess what? Every reader of this forum is in the luckiest 1% of humanity.
I don't care what the cause is or who you give to—charity, your family, a political party, whatever. I don't care how much you give. But give some money away this year to a cause or person you care about. It will do you good. Done well, it will do them good.
Try to adopt a “steward” mentality. Imagine this isn't your money. You're just managing it for a few decades on behalf of the world. Manage it well, and perhaps you'll be given more to manage. 2017 was the first year we gave away more money than we spent. Don't worry, we still spent plenty and saved plenty—and the IRS knows we paid plenty of taxes. We've given away more than we spent every year since then, and for the first time in 2025, we've given away more than we paid in taxes, too.
What do you think? What role does giving play in your life? Do you give to charity now? Do you plan to when you die? Where else do you give?
[This updated post was originally published in 2017.]