Charitable Donations: When it doesn’t make sense to give your money away

Lest you think I’m some Scrooge-like miser, I donate to charities on an annual basis and write one cheque at the end of the year. I tend to give a flat amount (nothing based on a percentage of my income, as my income is very erratic), and I vary the amount based on how much I earned that year.

The more I earn, the more I give. But only if I can afford it, which as luck would have it, has been the case since I started working.

See, there are times when giving to charity (while commendable) is utterly, doggone stupid.

I’m not talking about being scammed out of your money and giving it to some fake charity that pays their board members $200,000 a year to sit around on their ass and do nothing.

I’m talking about people who cannot afford to donate to charities, but do it anyway.

Let me tell you a story: I know someone who is a very kind-hearted person. He is the nicest, most generous person you  can imagine, and doesn’t seem to have a mean bone in his body.

He and his wife made $110,000 for the past couple of years (together) and didn’t save a penny of it for emergencies. They lived fairly comfortably but not extravagantly, had about $10,000 in credit card debt but the one thing that they made sure to do every month was give away $500 of their net cash to charities.

That’s $6000 a year, and they had $10,000 in debt.

To make matters worse, his wife lost her job, and now their income is down to $55,000 a year (just him). They can’t cover their bills — mortgage, 2 cars, 2 kids…. but the worst part of it all?

They are still giving away $250 a month to charities.

It’s totally commendable and an incredibly unselfish act beyond belief, but so totally asinine.

It is in their budget, and now they’re $45,000 in debt (they took out all of the equity on their home which was $30,000) and they racked up more on their consumer credit cards to the tune of $15,000.

When you can’t take care of your own family, to put food on the table, buy new winter boots because your kid can’t squeeze his feet into his 2-year old ones any longer, you don’t give money away.

For me, it’s the same principle of deciding whether to pay for your own retirement or your kids’ educations.

Ideally, you’d like to do both, but when push comes to shove, I’m taking care of my retirement first so I don’t have to burden my children or rely on them, and anything leftover will go to their education funds.

Granted, this couple I’m talking about were also pretty clueless in the past to not have saved at least $250 a month in an emergency fund for unexpected problems, but sometimes a budget needs to be revised when it comes down to your family eating and having a place to sleep, versus someone else’s.

Not only that, they had debt that they’ve just been paying the bare minimums on, just so they could give money away.

This might sound very mean and you might think I’m some cold, icy person to say that, but we can only help when we ourselves have been taken care of.

It does society and other families no good if you end up losing your home, going on unemployment, standing in line at food banks and unable to care for your own, especially if you are starting to rack up a lot of debt and you are STILL giving your net earnings away.

The general rule of thumb (which isn’t very accurate but is certainly compelling): $1 saved is $2 earned, because we have to factor in taxes, fees and other things that make our lovely gross income cut itself in half when it transitions into our bank account.

So in essence, they were giving away $1000 a month gross, and are now giving away $500 a month gross that they simply cannot afford.

In conclusion, I gently tried to point out the above, that if they lose their house and end up not being able to take care of their own family… that it would do those wonderful charities no good if they ended up on the other side, receiving help rather than being able to give it.

I think he got my point but I still feel like he feels and urge to give and that he can’t stop himself.

How can you rationally give money away when you have none, yourself?

About the Author

Just a girl trying to find a balance between being a Shopaholic and a Saver. I cleared $60,000 in 18 months earning $65,000 gross/year. Now I am self-employed, and you can read more about my story here, or visit my other blog: The Everyday Minimalist.