Balancing Giving and Saving

Sharon writes in:

How do you manage the balance between saving for the future and for your own personal goals with a desire to give to those less fortunate than you? It feels like they’re going in opposite directions.

To an extent, this is a struggle for virtually everyone in the first world. Everyone reading this lives well into the upper half of the world in terms of standard of living. We constantly spend money on aspects of a standard of living that far outstrips anything in the lifestyle of the poorest people in the world.

This is a philosophical issue I’ve worked on for a long time in my own mind and I’ve come up with a handful of conclusions about it.

First, it’s not really saving your money that runs in opposition to giving. It’s spending your money with reckless abandon. Money saved in an investment or in a savings account is still yours to use at a later time, but money spent on unnecessary things is money that’s essentially lost to you.

At the same time, the ideas that push me to be a saver are the same ideas that push me to reduce that unnecessary spending. The less you spend on unnecessary things, the more you’re able to save. Alternately, the less you spend on unnecessary things, the more you’re able to give.

So, what about saving versus giving?

There’s no reason not to do both. Many religions, for example, encourage their followers to give 10% of their income to the less fortunate. Other people happily donate to charities of all kinds. These kinds of gifts help to make a difference but don’t cause the people who give to fall into financial hardship to make the donation. They’re very capable of saving an additional portion of their income beyond what they give to charity.

Having some savings means that you have less chance of becoming reliant on charitable giving. This enables the money that’s given to charitable organizations to go to other people who need it instead of you. This is, in itself, a charitable act.

Many large savings goals retain their value when reached. My wife and I are saving for a large home in the country. When we buy that land and build that home, we do so with the knowledge that we will some day be able to sell it and recoup our investment. It’s not lost money.

There’s no reason not to pass on a large portion of your estate to those less fortunate. My wife and I plan to leave behind only small portions of whatever estate we leave to our children and grandchildren and have the rest go to charitable groups. This enables us to protect ourselves while we’re living from draining charitable programs while delivering the wealth we’ve accumulated to charitable programs when we’re no longer around.

Charity is more than just donating money. Time donation is another powerful form of charity. Simply giving some of your hours to fulfill the needs of a charity is a powerful gift. Along those same lines, giving your skills is another powerful non-monetary gift you can give, one that translates into a monetary savings or pathway to more donations for the charity.

When I think about my savings and my charitable giving, I try to think about where exactly each dollar of mine will end up. If I know that there’s a good likelihood that the dollar will remain in my estate for the rest of my life (and eventually be donated after my passing) or be used in some method that will prevent a charity from investing in me, I feel good about how the dollar is used. It’s yet another motivation for me to make wise moves when it comes to what I do with every dollar that comes into my life.

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10 thoughts on “Balancing Giving and Saving

  1. krantcents says:

    I agree, the conflict is certainly in the spending choices. I think it is not just the money you spend, but how you use your time. This year I plan to start volunteering. Giving my time is even more deliberate than just writing a check.

  2. Johanna says:

    It sounds like what Sharon is asking (even if she wouldn’t put it quite this bluntly) is “How much do I need to give to charity before I can feel good about keeping the rest of my money for myself?” Which is indeed a difficult question. Here’s how I answer it:

    It’s been estimated that a transfer of 1% of the rich world’s income to the poor world would be enough to alleviate the worst effects of poverty. (The number may be a bit higher now, with the increasing effects of climate-related disasters, but that’s the right order of magnitude.) So I regard 1% as a good minimum amount to give – it’s doing your share, but no more. But eventually, you’ll want to give more, to make up for other people who aren’t doing their share.

    So start by giving 1%, and then as your income increases (as hopefully it will), increase your donation by a portion of your pay raise. That’s what I did, starting five years ago, and my donation is now up to 7% of my income. Could I give more? Sure I could. And in the very near future, I will.

  3. Pat S says:

    Great question. While giving is definitely a worthwhile cause, if you are one paycheck away from getting evicted because you have inadequate savings, you are in no position to give. You are only one paycheck away from being a charity case yourself. Wouldn’t it be better to provide for yourself in worst case scenarios and give from the heart when you are assured of your own financial security (or at least build a little cushion).

  4. lurker carl says:

    Charitable giving includes donating time, knowledge, skilled hands and strong backs. Money, without people, is only paper.

  5. Debbie M says:

    Awesome answer, Johanna!

    Once I no longer needed all my money for myself, I had the same question. Part of me felt that I should give as much as I could afford to without going into poverty myself. But part of me didn’t want to give away half my income–I wanted it all for myself. I looked up the average amount that other Americans were donating (back then it was something crazy small, like 3%) and decided that anything more was a good compromise. I ended up settling on the Biblical 10% as a final goal (I worked my way up to it slowly). That doesn’t all go to the poor–much of it is for the environment and to fight pain and abuse.

    Since then I’ve added another 1% for things I actually use but don’t have to pay for (like public TV and free computer resources) and another 1% to promote things I wish we had (like more biking trails). The former is kind of like paying people back and the latter is almost wholly selfish, though it helps others with my same wants.

    I’ve also decided I’d like to set aside a certain amount to lend family and friends when a loan could help them get to a place where they could better help themselves, though currently I just take that money out of my “fun” budget.

    I’ve decided not to feel guilty that I could afford more but don’t pay more. Mostly because feeling guilty is no fun. Because I’ve chosen a percentage, then when I make more, I also donate more, so that’s good, though it probably should be like income tax where the percentage goes up as my earnings go up.

  6. Debbie M says:

    For those of you who give your time, how do you decide how much time to give to the needy and how much time to keep for yourself?

  7. valleycat1 says:

    #6, Debbie M – I take an honest look at how I’m spending my time & what my responsibilities are. Once your responsibilities that take time (including but not limited to family, church obligations, work, household, sleep & exercise) are accounted for, look at what time you have left & how you spend it. Could you take a block of time each day, week or month from your ‘me’ time without feeling overextended? Some people are better able to take a day or two each year (like for Habitat for Humanity) rather than regular time each week. I’m an extreme introvert, and being around a lot of people all the time exhausts me, so less frequent larger blocks of time (or something that’s one-on-one) work better for me; my child is just the opposite.

  8. Johanna says:

    Volunteer work – “giving time” – is a great thing to do, but I don’t think it’s right to consider it an equal substitute for giving money. Organizations can’t run on volunteer time alone. They need money to pay their staff, rent their office space, keep the lights on, buy materials, and so forth.

    If you’re at a place in your life where you have a lot of spare time but little or no spare money, then by all means volunteer. But that’s not the situation Sharon’s asking about. She does have some spare money, and is wondering how much of it to give away and how much to save for herself. Saying “just give your time instead” doesn’t really answer the question, because once she’s given her time, she’s still left with the question of what to do with her money.

    If you’re in a situation where you need to decide between giving time and giving money (although I have trouble imagining how that would arise – why not give both, if you have some of each?), the way to decide is to ask the organization you want to help what they need most. (And be prepared to hear that what they need most is not what you’re most interested in giving.) Because in the end, that’s what it’s all about – what’s the most beneficial to the people or cause you want to benefit, not what’s most “meaningful” or “deliberate” for you.

  9. Baley says:

    It is not “a charitable act, in itself” to take care of myself financially. That’s ridiculous. It is a selfish act to take care of myself, and it takes giving up some of my selfishness to give money to someone less fortunate. I don’t think you can just cop out of giving because you’re not taking charity from someone else. If everyone did that, no one would give. Also, it’s great to plan to give from your estate once you die, but that’s not helping you grow as a person. Giving is good for the soul. Those who can, should give. If you can’t give money, then as Trent and others have said, give time. If you can’t give either, then get yourself in a better position so that you can. But don’t pretend you’re being charitable by saving up money for the future.

  10. Dana says:

    I disagree. I do find that the idea of charity conflicts with that of saving. I save so that in case of an emergency I am prepared, but what about those who are so much less fortunate than I that are going through that emergency now? I feel like saving is saying I am worth more money than these people, who are, for the most part, only in a more desperate situation than I due to who they were born to (class, how they were raised). What could make one human life worth a higher dollar amount than another?

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