How much money should you give to charity?
The holiday season is a time of generosity and this video provides some basic facts about charitable giving and presents 4 models that may help you decide how much you would like to give to charity so that perhaps you are more deliberate with how you donate your money.
Disclaimer: this video is in no way saying that you should be giving to charity and I am not presuming anyone’s individual means or ability. Many people need help and support, and are the recipients of charitable giving so this is not blanket advice for everyone.
Basics of Charitable Giving
Let’s start by defining charitable giving. According to Investopedia, a charitable donation is a gift of cash or property made to a nonprofit organization to help it accomplish its goals for which the donor receives nothing of value in return. This last part of the definition is key because it establishes that giving is not a transaction, a purchase, or an investment that could later garner return, it is a gift so it does not come with strings attached or something that the organization must do for the donor. There are a couple of nuances to be aware of.
The definition mentions “nothing of value in return” but many donations are subject to tax deductions. A lot, but not all, charitable giving does come with tax benefits depending on your jurisdiction and many people would argue that tax breaks are of value so this is worth noting.
When it comes to “no strings attached”, when you give to a charity technically you don’t have a say in how they spend that money, you’re supporting their mission and usually, if they are a registered charity, the government is overseeing that they are spending the money in the ways that were promised. Most countries have very strict charity law and regulation. However, in practice, charities and not-for-profits try to deliver what their donors are expecting of them because they want to be good stewards of the money and they want to have the donor support again in the future.
Giving Statistics
While I couldn’t find global figures on how much money is given total across the globe, I did find the World Giving Index that compares how charitable different countries are based on large surveys of populations and their giving behaviours. In 2020, one in ten adults around the world donated money to charity. Interestingly and perhaps not surprisingly, 2020 saw a large increase in charitable giving because of the pandemic - somewhere between 5-15% depending on which country you are in. The top ten countries with the most individual donors were Indonesia, Myanmar, Australia, Thailand, Kosovo, the UK, Iceland, Netherlands, New Zealand and Bahrain. In Indonesia for example, one in three adults donated to charity. Most of the statistics I could find about the actual amount of money given to charity were for the US. In the US in 2020 the total charitable giving including that done by individuals, corporates and foundations was $471B or approximately 2.3% of Gross Domestic Product. $324B of that was given by individuals, equalling approximately 69% of total giving (NP Trust). The majority of charitable dollars went to religion (28%), education (15%), and human services (14%).
Models for determining how much to give to charity
There are lots of ways that people decide how much money they want to give to charity. It may sporadic and based on how much they can afford at any given time or they may set a goal based on some sort of mental model. Here are 4 for you to consider:
ODA Target - ODA is the short form for official development assistance and the global community has determined that countries should give at least 0.7% of their Gross National Income. If this is what we expect our governments to live up to, it may be a good goal for individuals to consider as well and it’s quite modest. For someone who makes $50,000 a year this would work out to $350 per year or approximately $30 per month.
Religious Guidelines - In Islam, Zakat asks muslims to give 2.5% of annual wealth to charity (The Guardian). Using the $50K per year figure again this would equate to $1250 per year or roughly $105 per month. In Christianity and Judaism, there is an ancient tradition of a tithe which is 10% of income. This is quite substantial and would come in at $5K per year or rough $415 per month.
Global or Country Averages - You can search for your country’s individual statistics but the global average is estimated to be somewhere between 2-6% of gross annual income (Giving What We Can). 2% would be $1000 per year for a 50K salary and 5% would be $2,500 per year.
1% Club - the 1% club which is a common goal for corporates. This is also the most common advice given on the internet about where to start with charitable giving because it is an easy number to remember and work with. This would work out to $500 per year or roughly $40 per month on a 50K salary.
As you can see, there are many models that could be used and there is no right answer so, of course, just do what makes sense for you. Having said that, if giving is something you have the ability and desire to do, I think it is a good idea to pick a model or percentage so that you can be a bit more deliberate with your giving. You know how it goes, time runs away on us and we may just forget all together unless we put some thought and intention into it.
Tips for Giving
Here are a few last tips you may want to consider when giving:
For most charities, having recurring monthly donors is preferable to one-time donations as they can plan better for the future. So if you like a charity, you may want to consider signing up for a monthly $10-20 donation as opposed to a single $100-200 donation at the end of the year.
You may also want to define certain goals within the amount you have determined for total giving. For example, perhaps you want to give 80% to organizations that align to your longterm goals. Perhaps you are passionate about gender equality or racial equity or climate change so you pick a few organizations that you want to support all year round. You could then save 20% of your annual giving budget for emergency situations that arise. For example, when there is a natural disaster or some sort of acute need. I remember giving extra to women’s reproductive right charities when the US declared in 2017 that it would be cutting all support to those types of organizations.
Another great way to mobilize money for charity is through an activity where your friends and family can contribute to a charity and support you at the same time. When I ran my first marathon, I raised money for PLAN International. It was an extra feeling of satisfaction to complete the race and know a deserving charity was getting well-deserved donations. And recently a good friend of mind got married and in lieu of a registry asked people to make donations to an organization of their choice.
And finally, I read a very interesting point while researching for this video, which is that it can really help to give publicly. It may feel a little icky letting people know that you are giving to charity but it actually can cause good social momentum which can in turn encourage others to give. One of my favourite examples of this is when Dan Levy, the star from Schitt’s Creek, publicly supported and matched donations to an indigenous eduction program at a Canadian University. You don’t have to be a celebrity or have a massive following to point people towards great organizations and programs.
Keep Learning
Here are a few great resources for further reading and learning:
How much money should we donate to charity? Giving What We Can
How Much Should You Donate to Charity? District Capital Management
How to Support?
With every video, I provide links to organizations that you may or may not choose to support with your pocketbook. These are some of my faves :)