collage of money, charts, student working and graduating

Giving Freely or Freely Giving

It is the time of year that we begin to be increasingly asked for charitable donations.  From the friendly volunteers ringing bells for the Salvation Army to this year’s packet of “free” return address stickers with the accompanying request for a donation, we are often inundated with requests to share our income and wealth.  And share our income and wealth is what American do.  According to Giving USA 2009, Americans donated an estimated $307.65 billion in 2008.  Although the recession is credited with this 2% decline (current dollars) in giving over 2007, it still represents charitable giving of about $1,000 per person in the United States.

Having said that, two-thirds of public charities saw decreases in funding in 2008, compared to 2007; while 54% of human service agencies experienced an increase in demand for their services.  The result is that 60% of human service agencies are cutting expenses, through services or staff.  Unfortunately, those most likely to report a downturn in their funding are those serving children and youth and those working to provide families’ basic needs (food, shelter, clothing, etc.) with more than half (53%) reporting a funding shortfall.  (Giving USA is a publication of Giving USA FoundationTM, researched by the Center on Philanthropy at Indiana University.)

How do you decide to whom to give and how much?  Is this an individual decision, a family decision, or one driven by self-interest or habit?  Do you check to see if the charity is a Better Business Bureau Accredited Business?  Do you even know where you give your money?

Over the past five-years, while I’ve been my father’s custodian, I was amazed at the phone calls and letters I received asking for his donation for the year. We know that some charities focus their efforts on the elderly, while others focus solely on their members, as do churches. Yet, we need to budget charitable giving like any other expenditure.  While some households make an annual gift to United Way, allowing their local board to make allocation decisions, others find themselves sending a token check to every solicitation that contains their favorite or most dreaded word, such as “Veteran”, “Cancer”, “Ducks”, “Disabled”, “Nature”, “Children”, “Refugee”, or whatever.  My guess is that those in the latter category have little idea about how much they give and how the money is being spent.  This conclusion is even more likely to be true, if they don’t itemize deductions on their taxes – which is likely if they don’t have a mortgage on their residence.

Several years ago, I did a presentation on “Living Better on Less” in a farming community that had been hard hit by, then, low commodity prices.  In the question period, a dapper, older gentleman stood up and said, “I’m doing better than most of the people in this room.  Each time I received a paycheck, I, first, gave some money to God and then I gave some money to me.  I saved it.  Now, when the chips are down, I’m doing alright.”  Since then, his advice has echoed in most every lecture I’ve given on budgeting.  While I do not care if God is first on your list, I do care that you are no lower than second on your list.  (It is, however, your list.)  In order to make this happen, you must include charitable giving as a budget category and make some hard decisions.  Today, with solicitations increasing to address the shortages in budgets, this need for you to act on behalf of your budget is even greater.

Given that we live in a free country, I’m not going to tell you where to give your money.  I can, however, tell you where others give their money.  If we take total charitable giving and divide it into each recipient category’s share of total charitable giving, it looks like the following.  I’ve included the dollars given in charitable giving to each category of recipient, the percentage of total charitable giving to that category, and the percentage change in charitable giving to that recipient between 2007 and 2008.

Category

$ Charitable Giving

% Total Charitable Giving

% Change 2007 to 2008

Religion $106.89 billion

35%

+5.5%

Education   $40.94 billion

13%

-5.5%

Foundations   $32.65 billion

11%

-19.2%

Health   $21.64 billion

7%

-6.5%

Public-Society Benefit   $23.88 billion

8%

+5.4%

Arts/Culture/Humanities   $12.79 billion

4%

-6.4%

International Affairs   $13.30 billion

4%

+0.6%

Environment/Animal     $6.58 billion

2%

-5.5%

Other   $48.98 billion

16%

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In the above table, for a recessionary year with declines in overall income, charitable giving increased in some categories, while it decreased in others.  (Real median household income in the United States fell 3.6 percent between 2007 and 2008, from $52,163 to $50,303.  – U.S. Census Bureau) The “expenditures” (charitable giving is an expenditure) that increase when income increases are called normal goods. When expenditures increase when income declines, the good is called an inferior good.  When expenditures increase by a greater percentage than income increases, the good is called a luxury good. (I am not claiming that any category is superior to any other, I am merely pointing out the facts and teaching some language of economics.  Those that have increased would be in the category of inferior goods; those that have decreased by less than the rate of income decrease are normal goods; while giving to a foundation was a luxury good expenditure.  It is also the case that some of these categories are deeply bound by habit, tradition, or group membership that precludes any changes in level of giving. )  Research, also, indicates that those with the highest incomes give a lower percentage of their total income to charities, than do those with the lowest incomes.

While this Tip did little to help you with your finances, it might help you make some decisions.  In exchange, these decisions could make you happier with your finances and have more money for items you need and, perhaps, want.  If they do, we reach our goal of you reaching financial success – as you define it.  Regardless, I am not suggesting you stop giving.  I am suggesting you make decisions to ensure that your dollars express your values, in support of your goals for our “grants economy”.  (The phrase “grants economy” was first used by economist Kenneth Boulding (1910-1993).)