Ask the Grumpies: How much should one give to charity?

Jess asks:

How do you decide how much to give to charity? I’m not religious so I’ve only heard of the 10% tithe recently and it seems like so much! At the same time, I know a “could” afford to donate 10% while still saving 15% as recommended, so is it wrong not to do so? I am very young (25) and the idea of compound interest has been hammered into me, plus I am reasonably confident I will be taking a pay cut in about a year to switch industries (into one that is better for the world) and move cities, so it feels safer to save a lot while I can.
Right now I’m donating about 2% through automatic monthly donations and so far in 2020 have donated about 2% in one-off donations. I expect to donate more this year given the many extenuating circumstances. Any advice is welcome!

There’s no hard and fast rule about how much you should give to charity.  In fact, in an ideal country, you wouldn’t have to give *anything* to charity because the government would be collecting taxes to take care of needs.  But, we don’t live in an ideal country and really, no country has figured everything out.

There are a couple of things to keep in mind though.

1.  Take care of yourself first.  Keep saving 15% for retirement!  Also make sure that your emergency fund is full, that you’ve got plenty of insurance, and that you have a plan to save for big goals like cars or houses (or job changes) etc.

2.  Just like the tax system, it doesn’t make sense for everybody to donate the same percentage to charity.  Richer people should be donating more to charity and lower income people should be donating less.  We explain why marginal tax rates make sense here, complete with a diagram that we stole with attribution from someone else.  But the main idea is that for people who have lower income, 10% is a huge cut in their ability to meet their needs and wants and is a drastic decrease in their utility (aka happiness).  For a billionaire, 10% leaves them with 90% of their billions, which is still more than any reasonable person should want.  They only get a small decrease in their utility.  Because that 100th yacht just isn’t that exciting.  (And honestly, we’d be better off if evil billionaires would stop getting their jollies by buying politicians and screwing with civil society.)

So… there is no right answer.  Only you can decide.  But as you make more, you should up your % donated, not just the dollar amount.  As you make less, you should cut it.

On top of that, some people have charitable giving plans where they figure out how much and where they will be donating in advance.  Other people (like us) tend to be soft touches and tend to donate based on whatever makes the hurting hurt less, and donate at any point in time based on our finances when we’re asked or read a sad news article or etc.  The former is probably a better way for the charities and a better way to live life, but the latter is how a lot of people do it, which is why we get so much junk mail and so many emotional appeals.

We just did our taxes, and gave about 1.5% of our income to actual 501c3 organizations, but we gave a TON more to political organizations which are not tax deductible.  Does that count as charity?  I tend to think so because I have a strong belief that government should be providing public goods and not, you know, separating children from their families and putting them into concentration camps.  $ to Stacey Abrams will have saved a lot more lives than money to pretty much any charity I can think of this past year.  Not to say that donating to 501c3 charities isn’t important, but political action and political donations are not wasted efforts or wasted money if your end goal is to make the world a better place.  They’re just not tax deductible.

Grumpy Nation, how do YOU decide how much to give to charity?  Has this varied over your income/life?

17 Responses to “Ask the Grumpies: How much should one give to charity?”

  1. Steph Says:

    I’m too lazy to go get my tax forms, but I’d also estimate I give 1-2% to 501c3 organizations. Almost all of that is in monthly donations, because it’s easier for me to just have that money go out automatically. I do sometimes respond to one-off requests for money, but frequently I see a post on twitter, etc, and go “oh, I should donate to that” and then…never do it. So recurring donations are just an easier way for me to contribute. I give some money to other non-registered organizations (gofundmes, political orgs last year), on the occasions when I do respond to a donation request post on twitter.

    I wish I donated more, and I do try to slowly increase the amount over time. In undergrad I was pretty diligent about donating 10%, but that fraction has unfortunately gone down over time (correlated with me actually having to support myself, vs. mostly working for spending money in undergrad). One description I’ve heard in the past is that you should give enough so that you feel the loss of the money, particularly for those of us making enough money to be generally comfortable. I also tend to consider my donations as coming from my “spend” money, so that I try not to let it affect my savings plans too much, and the pinch is coming from, e.g., buying less hobby supplies.

    • Jessica Says:

      I’m the one that sent in the question. Totally agree about the monthly donations!

      I think I would struggle to consider it as coming from my spending money, because I spend way less than I earn, so I don’t set a limit on my spending. I plan/forecast my annual spending then set my retirement contributions to include the rest. My employer has an after-tax contribution / rollover option, so my limit on retirement contributions is 50% of my net income, which I sometimes get close to but don’t tend to exceed so there’s effectively not an upper limit on retirement savings either. I don’t want a house, wedding, kids, already have a healthy emergency fund… no real long term savings goals other than “the future” generally. Essentially, I spend what I want, which is not that much, and then the rest can go to charity or retirement. I can’t imagine donating enough to charity to feel the loss of the money because I don’t feel the loss when reducing my retirement contributions, and for me that is where donations come from.

      I’ve been trying to think of it as another category entirely, and set up general rules about it similar to the 15%+ for retirement. That way I don’t feel like I’m taking away from my savings OR my spending, but instead I’m meeting a totally separate financial goal. Mathematically that’s not true but it is what feels best :)

      I realize this is a great problem to have. Just thinking it through carefully because I want to do good in the world with the good fortune I have!

      • Jessica Says:

        Oops, I meant 50% of my gross income. The total income before taxes. Always mix those up!!

      • Steph Says:

        Gotcha, we are in different circumstances, but I think that’s a great way of thinking about it! Setting it up as a separate category seems like a good way to make it feel intentional.

  2. Leigh Says:

    I found my old post where we increased our giving % from 1% to 2% (of gross income) in mid 2018. We are still at 2% today for 501c(3) charities and political giving, but our income has gone up a lot since then, so the $ amount is more. I would like to increase the % further especially since we aren’t spending our normal 4% on travel right now and we’ve just been saving that, but my husband wants to give more to family first. It looks like if you include family and non tax deductible/political gifting, we were closer to 3% in 2020.

    We use a Donor Advised Fund for probably half of our donations? I have a monthly contribution set up that is about half of our 2% giving budget from monthly income and I then have two monthly recurring donations set up from the DAF. We then add extra to it the month after there is more lumpy income. We both have a list of charities that we make sure we donate to each year at a certain level and also donate as we feel a cause come up throughout the year. I love that using the DAF means I can stay anonymous from the charity when I don’t want junk mail.

    • nicoleandmaggie Says:

      Oh gee, I wasn’t even including family in my thoughts. This year that’s been another … I don’t even know how much… let’s see… one semester of cheap tuition, one semester of kind of expensive tuition, two semesters of textbooks, emergency money for groceries, fancy cloth masks, emergency pandemic mail order food… That’s been at least 2% of our last year’s income this past tax year by itself.

    • Jessica Says:

      DAF are interesting to me! I don’t think I’m at the point in my finances where it makes sense to do it, but I’m trying to understand them so that I can know if/when it becomes a good idea.

      Would definitely love to remain anonymous! :)

    • Bill Says:

      You can donate to a lot of charities through network for good (actually their donor advised fund) and they have an option to be anonymous to the charity. https://www.nfggive.com/home
      They have information claiming they disburse promptly and to your desired charity.

  3. Jessica Says:

    So excited to see my question this morning! I definitely include political donations when I think about this. I don’t itemize my taxes (no mortgage so standard deduction is better), so I don’t even pay attention to whether orgs are 501c charities, though I’ll take the $250 or whatever amount tax break above the standard deduction that they’re doing this year.

    Since writing this question I’ve upped my giving to ~5% through monthly donations. I spread it over multiple organizations, partly because I care about multiple causes and partly to diversify any risk of later being unsatisfied with the org. I read Doing Good Better and liked the overall philosophy of approaching donations, though I am not adhering to effective altruism strictly at all. 5% feels pretty good at the moment, and I like the idea of increasing the percent as my salary increases. When I get raises I’m hoping to allot significantly greater than 5% of the increase to giving. I definitely prefer ongoing monthly donations, but I do one-off for political causes. Are there good organizations I should consider for ongoing dem political donations?

  4. Revanche @ A Gai Shan Life Says:

    I think we give 1.5% of our gross to deductible organizations. I don’t keep track of direct / mutual aid (GoFundMe, Venmo/Paypal, and the like) but that’s a decent chunk every year, in addition to political giving. We’ve dramatically increased our overall giving over the past couple of years, not as much as I’d thought we would by now, but still a decent amount and I am trying to give in balance with our other priorities: making up for lost retirement investing time, keeping a healthy emergency fund, spending on living right now. Sometimes I catch myself thinking “this money would be better spent on giving to charity than X for myself” and that’s sometimes good but sometimes not. So I have to find a balance there too.

  5. middle_class Says:

    I’ve definitely increased political-related donations this year. My husband and I don’t consult each other on small donations so sometimes we end up donating twice to the same group.

    I tend to respond to different pleas that I come across in the news, via email or social media. I have no idea what percentage we donate.

    I don’t know if I would include family in the percentage even if “needy” because I am not sure where to draw the line. If i give to my neice’s college fund or help pay for cost of an educational trip to DC, would that count?

  6. Haley Says:

    I’m a big fan of small direct donations like tipping a lot extra, especially this past year. So I don’t really keep track of that (and am fortunate that I don’t need to!). After that, the bulk of my donations go to kid’s school which is the only way they get art and music. For budgeting, I think of the category as Giving rather than Charity, because I do include money used to help family. We typically fall around 2-3%.

    When I was in my 20s and didn’t have much money, I volunteered my time more than $$.

    My employer matches donations and it irks me to no end that the process always takes months.

  7. Debbie M Says:

    I like your answer, but that’s not how I approached it, and I’m going to stick with my current method. When I got my first real job three decades ago, I asked myself this same question. I knew about the 10%, and I looked up the average, which was something much smaller, like 2% or 3%.

    I also thought I don’t want to donate anything because I want all the money for me me me! But also, I want things to be fair, so as long as someone is worse off than me, I should be giving more. I compromised at 10%, which seemed doable (and tiny compared to what I could give if I lived a homeless lifestyle) but also huge when compared to the average. I think I started with 5% and worked my way up over the next few years.

    Then I also donate a tiny bit more to causes that actually help me or have helped me like public TV and wikipedia. And AOC taught me that if politicians could get tiny, but regular donations, they don’t have to spend so much time on the phone begging rich people to give them money and can spend more time researching the issues and bills they are voting on. I would like my politicians to not spend all their time begging people for money, but I just can’t stomach sending them donations. So I send $3/month to AOC. I feel like she’s kind of the Great Educator of the House, especially at first.

    When I was richer, that percentage got up to 12%, but now it’s back to 10%. Except I gave away half my first pandemic relief check. But only 10% of my second one because I just had tens of thousands of dollars of house expenses.

    I calculate the percentage on take-home pay, so I actually donate a smaller percentage of my gross pay. (I’d like to think that at least 10% of my tax dollars, etc. are also going to good causes.)

  8. Debbie M Says:

    Another idea is to base your contribution on your wealth rather than your income. According to wikipedia, zakat, the Muslim mandatory charitable contribution, ‘is customarily 2.5% of a Muslim’s total savings and wealth above a minimum amount known as nisab.’ A calculator I found excludes the value of the house you live in, which is the vast majority of the wealth of most Americans. But it does not exclude self-funded pensions (thus 401Ks and IRAs). For me (assuming a nisab approaching zero), that turns out to be 3.5 times as much as I’d pay based on my pension income. Wow. Now I feel stingy again. Yet, for now, I’m sticking with my 10% of net income strategy. Later, when I can tell whether I’ll need all of that IRA, I may change things.


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