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?