With the holidays just around the corner, you’ll likely start to get more and more phone calls from charitable organizations asking for donations. You’re sure to find the Salvation Army stationed outside of stores ringing their bells hoping some kind passerby will drop their spare change into their red buckets. If you’re like most people, the charitable spirit will take hold and you’ll feel compelled to give what you can to those less fortunate.
Would you believe me if I told you there is such a thing as over-giving to charity? Sure, people under-give all the time when they avoid calls asking for donations or ignore the homeless person begging for money on their walk to work. But overgiving? Believe it or not, it is something you should be aware of. According to an article from CNBC, it is important that you set up a donation plan as the wealth gap between the rich and poor in charitable giving grows.
The amount of philanthropic donations is increasing among low- and middle-income families (those bringing in less than $100,000 a year) who donated 4.5 percent more of their income in 2012 than they did in 2006, before the start of the recession, according to a report from The Chronicle of Philanthropy. At the same time, higher-income families earning yearly salaries of $200,000 or more reduced the amount of income they donated by 4.6 percent.
The reason those with more to give would give less and those with less would give more? It seems a little backwards, but as Chronicle editor Stacy Palmer explains to CNBC, wealthier individuals tend to be more cautious of market fluctuations, while lower-income Americans feel the need to help each other out.
Whichever income bracket you fall into, you should never give your money away frivolously or feel pressured to donate more than you can afford. Financial advisors emphasize the importance of having a donation plan so that you’re able to make donations without jeopardizing your other financial goals.
It’s easy to over-give, according to certified financial planner Sean T. Keating, because very few people set an annual budget for charitable gifts, so they are acting spontaneously when they make donations rather than giving thorough consideration to their finances. Stacy Miniutti, vice president of marketing for nonprofit assessment site CharityNavigator.org, advises making yearly donation plans where you decide exactly what charities you’d like to donate to in advance.
It also makes sense to consider how you’re donating your money, CNBC explains. For instance, it may be better to gift appreciated assets rather than cash, which could allow for a larger gift by being tax-exempt. Additionally, it’s always better to give directly to the charity you’re interested in as opposed to going through a secondary sites which often collect 3 to 5 percent of your donation as a processing fee.
So, the moral of this story is not to encourage you not to donate to charities anymore. Quite the opposite, you should do what you can to support the causes you care about, but always keep your finances in mind!