You've heard of Black Friday and Cyber Monday, two days dedicated to giving to others (along with rampant consumerism and some sweet Wal-mart fight videos.) There is a third day that week dedicated to giving that you might not have heard about — Giving Tuesday. People give for all kinds of reasons- mostly to do good in the world around them, but also for the more cynical, to impress others, feel better about themselves, and get a tax deduction. The cynics point out that 12% of giving occurs in the last 3 days of the year and 31% occurs in December. I would point out that 69% of giving occurs before December, and if 8% were what you would expect in December, then maybe only 23% of giving should be looked at cynically!
One of the biggest cynics of charitable giving, at least among financial authors, is Phil Demuth. In his Overtaxed Investor he says this:
I love charity, but taxes aside, we get our charity feel-good afterglow buzz on too cheaply. It's safest to assume that any charity is a well-meaning scam until your own research proves otherwise. Of course, the people running the charity don't think of it as a scam. They think they are Mahatma Gandhi. All that proves is that they are experts at rationalizing their self-interested behavior, just like the rest of us….Here's an instant screen I copied from Nassim Taleb: does the charity have any salaried officers? If so, look elsewhere….The next question to ask is whether they do more harm than good. I count wasted money as a positive evil. The same money could have been left in a tip jar at Starbucks, where it would have gone to hardworking young people starting out in life. As Milton Friedman says, the most efficient operation is where you have people spending their own money on their own behalf. The least efficient operation is where you have a group of people spending other people's money on behalf of yet a third group of people (which is how charities and governments operate.) If a charity has a cost-benefit analysis of all the good they are doing per dollar spent, bring it on. In the absence of such evidence (which they would certainly be motivated to supply if it existed), it is safe to assume the money was wasted.
There are certainly plenty of other charitable cynics out there. I have basically three answers for them:
# 1 Spend your money on whatever you like.
If someone else wants to “waste” their money by giving it away, that's their problem.
# 2 Almost every charity does at least 50% as much good as the government.
Some people have a problem with the tax break given for charitable giving, as they feel everyone shouldn't be forced to “subsidize” it. To that, I would point out that the tax break is at most about 50% of what was given. There are plenty of inefficient charities out there, lots of charities whose mission I disagree with, and a few outright scams. But overall, I think we as a society are getting a bargain for what is done by charities. We basically get a “100%+ match” on the dollars we subsidize. In fact, thanks to the standard deduction at low end, the fact that even middle class folks who itemize have a relatively low marginal tax rate and the phaseout of itemized deductions at the high end, we as a society are probably only subsidizing something like 10-20% on charitable donations.
# 3 We forget the benefits to the giver
When running a cost-benefit analysis as advocated by Demuth, we are neglecting the benefit of the giving on the giver, and I'm not talking about the tax deduction or getting your name on the university building. I'm talking about the positive effect it has on your ability to keep money in its proper place in life. Since we are mortal, all of our money is only ours temporarily. We are merely stewards of it. Whether you believe you are the steward for God, your heirs, charity, or the government, the fact remains that we only get to use it for a few short decades.
At any rate, in 2019, Giving Tuesday raised $511 Million for charities. Granted that's nothing compared to the $427 billion given to charities in 2019, but it's at least as good a time to give as the other 364 days and it's a great time to think about what charities you and your family would like to support this year. In preparation for this post, I emailed 10,000 WCI readers and asked them what charities they give to and why. [By the way, if you're not getting these emails, sign up here. You get sweet free newsletters and I won't spam you.]
Here's a sampling from the responses that poured in. I'll go first:
My Family and I donate to our church, the local public school PTAs, Muscular Dystrophy Association, Doctors Without Borders, The Food Bank, The WCI Scholarship, and The Homeless Shelter for a total of about 12% of gross income. My family sits down each December, talks about the importance of giving, and decides who they will donate to that year. They feel giving some of their money away helps them keep money in its proper place in their lives.
A Louisiana Psychiatrist donates to St. Jude's Children's Hospital, my hospital's childrens' cancer research program, my kids' school, an orphanage in India, Alzheimer's Association, and miscellaneous (This year flood relief).
Dr. Earl Stewart, Jr., is an Internal Medicine Physician in Atlanta, Georgia. He believes in the scriptural principle that “to whom much is given, much is required.” It is that principle that stirs him to support financially many charities and scholarship funds. He donates in the form of tithe and offerings to his church and several other churches in the Augusta, Georgia, area. He gives to each of his Alma Maters, Mercer University and Meharry Medical College. Each December he donates and encourages others to donate to the Augusta Lincoln League, a collaborative of African-American businesses, colleges, and congregations in his hometown that sponsors a scholarship fund that supports many undergraduates of African-American descent from the Augusta area. He also anonymously supports several other charities and personally sponsors scholarships to youth in his hometown.
An Anonymous Reader says, “I try to personally focus on those that have a really high percentage of money that actually goes to the cause (not to administrative fees/CEOs), but also to those that have direct impact on the ground. My personal favorites are St. Jude's, Humane Society, and the Fisher House Foundation. I also donate to a cause dear to me, Israel – a couple of charities that focus on directly helping soldiers and soldiers who immigrate and don't have family are Friends of the Israeli Defense Force and Lone Soldier Foundation. Also, organizations that provide advocacy efforts such as Stand With Us and The Israel Project also get my donations.
A Sports Medicine Physician in Atlanta, GA donates to his church, Josiah Venture, Compassion International, the United Way, and usually allocates a few thousand at the end of the year towards a rotating group of other charitable organizations (Fistula Foundation, Seva Foundation, GiveDirectly, and Bere Adventist Hospital in the Republic of Chad made the list in 2016). This typically adds up to around 12% of his after-tax income.
The Husband of a Family Physician in Jamestown, ND, writes, “My wife and I started an endowment fund to help cover medical costs for families who experience an infant loss.”
A Primary Care physician in South Carolina says, “As a family, we donate to our church, church pre-school, high school academic booster club, local free clinic, boys and girls club, and a medical clinic for abused children. We will likely be giving toward local relief efforts. We try to give throughout the year around quarterly production distribution. Once Christmas presents are opened in late December we discuss as a family the importance of giving back, especially to local causes. It usually totals around 7% of our gross income.”
A Psychiatrist in Washington, D.C. donates to Save a Child's Heart, a nonprofit organization that brings children with congenital heart defects from developing countries to Israel for life-saving cardiac surgery. Founded in 1995 by cardiac surgeon Amran (Ami) Cohen, its aim is to help developing countries improve the quality of pediatric cardiac care and create centers of competence in these countries.
A Pediatric Dentist in Gilbert, AZ, donates monetarily to his church, the Military Family Relief Fund, local public, private and charter schools (majority is offset with an AZ tax credit), a local foster care organization, breast cancer research groups, and other small local charities. Every time they do it, the children are able to participate with their own money if they desire. This helps keep the family grounded and aware of ways to help others. Total donations are around 12% of gross income.
A Maternal Fetal Medicine Fellow in Birmingham, AL donates to his local church, Live Beyond and his undergrad alma mater for a total of about 11% of his gross income. He and his spouse discuss at the beginning of each year if there are any organizations other then their church family that they would like to donate to. Tithing is a core part of their faith and they believe that giving puts their material possessions and spending habits into a perspective that helps them be better stewards with their finances.
An Anonymous Reader says, “We have seen God prosper us at times so we have learned to give generously and we have received the blessing of giving. We not only give to our church but also to various missionaries, ministries to the poor, etc, which now is about 30% of our income. In addition, we give another 5% to our children and grandchildren on a monthly basis to help them save for college. What a joy giving has become.”
A Family Doctor from Indianapolis divides 10% of total income each month to his parish, Catholic Charities, Franciscan Friars of the Renewal, Bethlehem Farm, Cor Project and an orphanage in Central America. He says, “On a monthly basis we donate to various charitable organizations, religious communities, people and efforts that are placed on our hearts. We've bought a car for a missionary once, books for a religious order, airplane tickets for a friend in need, a week-long retreat for a family member, medicines for a mission trip among many other things. Sometimes we just send cash to those in need. The last part is good to help us be generous even when we don't gain by tax breaks. Planning our giving is our favorite part of the monthly family budget meeting!”
Chris Duncan, a CD “Broker” near Sacramento, CA, primarily donates to his church, Compassion International, YWAM, Air1, and KLove. Small amounts are given to various school programs and young people going on short-term mission trips. They donate around 12% of their gross income. He believes “to whom much is given, much is expected”.
A Pediatrician from Arizona financially supports his local church, various Christian missionaries, Compassion International, The Arizona Partnership for Immunization, Christian Medical and Dental Association, and those financially in need due to medical conditions. Donations total about 14% of gross income. He also enjoys giving of his time and medical skills to local free health clinics. He says, “While debt payoff consumes a significant portion of earnings, giving first from time and finances keeps us balanced and curbs the trend towards accumulation.”
A Resident in Dallas, TX donates 10% of her income to her church. She says she's working on forming good habits early.
An Ophthalmologist in California puts 10% of his income each year into a donor-advised fund by donating highly appreciated stock shares and taking a tax deduction. Through the fund, he donates to his spiritual/religious
A Medical Student in Pennsylvania and his wife donate 10% of (his wife's) gross to their local church. “We could take less loans and not give to the church, but we both agree that we are happier to take more debt and give than to not. The church and people have needs in the here and now, and we are willing to use our access to capital to help meet them despite the cost to our financial future.”
An Anonymous Reader says, “Instead of donating money, I donate goods and my time to various charities in Chicago. I currently do mostly animal shelters and food banks.”
A Hospitalist in SW Missouri says, “I donate to my church, the local Salvation Army chapter, and Convoy of Hope, the faith-based relief agency that was founded locally. Also, I donate to and fly with the local Honor Flight chapter, flying WWII, Korean and Vietnam vets to see their memorials in Washington, DC. It is well-organized, and they like to have a doc on each bus to help look after the vets that day. This year it will probably be about 8% of gross.
An Ophthalmologist notes that, ” My wife donates about 3k per year to our church. This is about 10% of her salary. Instead of donating my money, I choose to donate myself. I typically participate in 1-2 mission trips per year where I perform eye surgery totaling 1-2 weeks away from work per year. I use this charity work as a deduction on my taxes like most would of donations. I feel this is the best way to donate as I know exactly where “the money” is going.
A Dentist in Louisiana writes, “I recently read a book called the Four Spiritual Laws of Prosperity and one of the laws was tithing. This inspired me to give $1000 a month to help individuals. I prefer giving to individuals (either random or friends) anonymously as opposed to giving to charitable organizations. I feel it helps reaffirm peoples' belief in humanity when they receive an unexpected blessing even if this method only allows me to affect just a few people at a time.”
The Physician on FIRE donates a portion of his salary and half of his blog revenue to charity, largely via his donor-advised fund. In addition to the WCI scholarship, he and his wife regularly donate to their boys' public school and their own alma maters, the YMCA, the local Salvation Army, food shelf, and soup kitchen. Additionally, their local no-kill animal shelter, hospital, church, public library, and families in need of assistance with heating bills have benefited from their generosity.
A Nurse Practitioner in SC donates to her church, Samaritan's Purse, friends and family taking mission trips, friends adopting children, Compassion International, FCA, Young Life, their local Classical Christian school where her children attend, and Clemson University for a total of about 12% of she and her husband's gross income. Her family gives 10% of their gross income to their church as a tithe to give and gives about 2% in additional funds to those needs over and above our tithe to causes close to our heart.
A Physician in Alaska donates to his church, the school PTA, local youth sports organizations (baseball, softball, tennis, and basketball), and to his medical school for a total of about 12%.
A female Emergency Physician with a stay at home husband says, “We give a flat 10% to our church. We give a set amount extra to missions every month through our church. We also give to individual causes as we feel led – usually Christian causes/missionaries/church building projects, etc. Gave recently to Alliance Defending Freedom, for example. The total has been around 12%. We hope our kids catch the generosity and realize money is temporary but generosity has eternal rewards.”
An Ophthalmologist’s Family in Texas gives to their local church, an undergraduate alma mater, Health Talents International, Eastern European Mission, a local child adoption agency and a local private Christian school. Donations account for approximately 12% of their gross income.
What do you think? Do you give to charity? Why or why not? What charities do you support? Comment below!