Main content
Course: Financial Literacy > Unit 4
Lesson 2: Charitable givingCharitable Giving: What, Why, and How
Explore what charitable giving is, why people do it, and how it can affect your well-being, happiness, and finances. Also given are some tips and strategies for making your charitable giving more effective and efficient.
Charitable giving: what, why, and how
Have you ever donated money, goods, or services to a cause or organization that benefits others or society? If so, you have engaged in charitable giving! Charitable giving is a form of generosity that can make a difference in the world and in your own life.
In this article, we will explore what charitable giving is, why people do it, and how it can affect your well-being, happiness, and finances. We will also give you some tips and strategies for making your charitable giving more effective and efficient.
What is charitable giving?
Charitable giving is the act of voluntarily giving something of value to a cause or organization that works for the public good. Charitable giving can take many forms, including:
- Giving money, such as cash, checks, credit cards, or online payments
- Giving goods, such as clothes, books, food, or furniture
- Giving services, such as volunteering, tutoring, mentoring, or counseling
- Giving assets, such as stocks, bonds, real estate, or vehicles
Charitable giving can support many different types of causes or organizations, for example:
- Education, such as schools, scholarships, or libraries
- Health, such as hospitals, clinics, or research
- Environment, such as conservation, wildlife, or climate change
- Human rights, such as civil liberties, equality, or justice
- Disaster relief, such as emergency, recovery, or prevention
- Arts and culture, such as museums, theaters, or music
Why do people give to charity?
People have different reasons and motivations for giving to charity. Some of the common ones are:
- Altruism, which is the desire to help others or improve the world.
- Empathy, which is the ability to understand and share the feelings of others.
- Religious beliefs, which may encourage or require giving to certain causes or organizations.
- Social norms, which are the expectations or rules of behavior in a group or society.
- Tax benefits, which are the reductions or savings in taxes that result from giving to charity.
- Reputation, which is the way that others see or think of you.
How does charitable giving affect you and others?
Charitable giving can have positive effects on the well-being, happiness, and health of both the donors and the recipients. Some of the benefits are:
- The warm glow effect, which is the feeling of satisfaction or joy that comes from giving to others
- The helper's high, which is the boost of energy or mood that comes from helping others
- The happiness paradox, which is the finding that giving to others makes you happier than spending on yourself
- The gratitude effect, which is the feeling of appreciation or thankfulness that comes from receiving or acknowledging a gift
- The social connection, which is the bond or relationship that forms between the giver and the receiver or the cause or organization
Research, evidence, and anecdotes support these benefits. For example, one study found that people who donated money to a charity reported higher levels of happiness than those who spent the same amount on themselves . Another study found that people who volunteered regularly had lower blood pressure and lower mortality rates than those who did not.
Because of this, a lot of companies have started charitable giving programs in which they encourage their employees to participate in charitable giving by donating their time, or even offering their employees money to be given to charities.
How does charitable giving affect your finances?
Charitable giving can also have financial benefits for you, especially if you plan and manage it well. Some of the benefits are:
- Lowering your taxable income, which is the amount of income that you pay taxes on
- Donations increase your deductions or credits, which are the amounts that you can subtract from your taxes or get back as refunds
- Donations can lower estate taxes, which are the taxes that apply to the property or assets that you leave behind when you die
However, these benefits depend on various factors, such as the amount, form, and timing of your donation, the type and status of the charity or organization, and the rules and regulations of your country or state. Therefore, it is important to consult a tax professional or use a reliable online tool to calculate and claim your tax benefits.
Want to join the conversation?
- In reality government should pay so that we don't have give and it can evaluate the so called good the money is doing.(7 votes)
- I wonder if it is as easy as that. Most charitable giving in the USA goes to religious institutions. The USA is set up, though, so that government money cannot be spent to advance religion (though it may be spent to help religious institutions do non-religious stuff).(20 votes)
- I like to give to charities because there are some people in the world who don't have as much as I do.
Comment on this question why you like to give to charities and what charities you give to.(7 votes)- I give to charities out of a religious motivation. Not all of the charities that I give to have a religious connection, nor do even the religiously connected charities to which I give use those funds for religious work. I give because it is my moral and religious obligation not to act as if everything I have is mine. I'm merely the steward of it, to use to do good.(7 votes)
- Do some people just give because they have too much, or if they want to have some fun? Like, two of my acquaintances/friends hosted a Harry Potter Diagon Alley "party", where people were invited to come and hang out; you had to bring money to exchange for fake galleons. Can these also be motivations?(5 votes)
- I'm one of those "some people" who give out of moral and religious obligation, AND because I have too much.
I would consider going to the Harry Potter thing you described as "spending", not "giving".(4 votes)
- Participation in your community can go further than you think. Getting a library card, even if you don't go to the library, participating in local theatre, even if it's backstage, gives these types of organizations proof of traffic, and therefore will receive more government funding, and qualify for certain grants and bursaries they hadn't qualified for before. If you are on a really tight budget, time and participation is a valuable gift you can give to your community.(4 votes)
- How does giving money away affect you positively, I don't get it(1 vote)
- You reap the joy of sharing.
You harvest the satisfaction of knowing that you have helped.
You rejoice in the self knowledge that you are a good person.
If you just do it for a tax writeoff, you're a piker.(7 votes)
- Why does charitable giving make people happy?(1 vote)
- We are "wired" to be generous and helpful. That's part of being human.(4 votes)
- So would it be a great idea if you would take the 10% tithe to donations instead to the church(2 votes)
- It's always good to give. 10% is a useful standard, whether it is to a church or not. The point is to give, because we all generally can live on a little less than we take in. If you can't make 10%, that's fine. Just be sure to be generous.(1 vote)
- The biggest problem I have with charities is that they're often spearheaded by executives who collect a large salary. I remember seeing a CEO of one of the branches of Bill & Malinda Gates foundation earning somewhere in the ballpark of $1 million per year. There are others that get paid 6-figure salaries, too.
So if 30% of the money is going back to the donator, and the other 30% goes to administrative costs, is there any meaningful justification to their existence?(1 vote)- You make a good point. The argument back is that the people who can lead a large organization don't work for peanuts, even when the organization is charitable. To get someone of the caliber to run an organization with an annual budget of tens of millions of dollars (like some charities) means being willing to pay as much as a for-profit corporation does.(3 votes)
- why do we get tax reductions for donations to some charities?(1 vote)
- The taxing authorities want to encourage certain functions in the society that the government might not want to pay for, so it "funds" them by letting people give money and not pay taxes on it.(2 votes)
- Why are some charitable giving ventures deductible on taxes while others aren't? Do different states in the US have different rules?(1 vote)
- 1) Not all giving is charitable giving. When you donate to an art museum, a church, a homeless shelter or a hospital, that is tax deductible. But when you donate to a political candidate or a political action fund or a lobbying organization, that's just you giving away money.
2) The rules about charitable giving deductibility from federal income tax are uniform across the USA. But in the 50 separate states and other US colonies, for local taxes, there are local rules.(1 vote)