It’s that time again: the time we try desperately to remind ourselves that receiving produces only a fraction of the joy of giving. The giving season tends to induce stress in those interested in personal finance because, as everyone knows, the seeds of wealth are in saving, not spending.
Yet, that truth seems to be false when it comes to charitable giving. Several studies have found wealthy people give more – but that’s not all. Behaving charitably doesn’t just correlate with higher income, but rather it seems to cause higher income. How can that be? I’ll explain more below:
Why Giving More Helps You Get More
In 2000, the Social Capital Community Benchmark Survey visited 40 communities across the U.S., interviewing 30,000 people to better understand American civic participation. Even taking into account education, age, race, religion, and other personal characteristics, the survey found that those who give charitably make more money than those who don’t (for every 10 percent income increases, donation tends to increase by 7 percent). However, more surprisingly, the survey found that the income disparity is because the more people give, the more they grow their wealth.
To discover this, economists isolated income and donation through an instrumental variable. This means they used a variable unrelated to income but closely related to donation: Volunteering is driven by the charitable impulse, but because wealth doesn’t buy free time, income hardly affects volunteerism. Then, economists predicted donation rates based on volunteer participation and correlated the rates to income. The correlation was positive, so giving more instigates higher income. In a scenario with two identical families, if one gives away $100 more, that family will earn $375 more than its twin.
But why? There are several suggested reasons that giving boosts receiving. For example, a study from the University of Oregon discovered that charity stimulates regions of the brain associated with meeting basic needs, indicating that giving is essential to the human experience. Additionally, charitable individuals are often perceived favorably and promoted to higher-earning positions faster than their tightfisted peers. Finally, the more a community gives, the wealthier it becomes. Donations can push up the income of an entire nation: Over the past 50 years, American incomes have increased 150 percent (corrected for inflation) and donated dollars have risen about 190 percent.
All this indicates that charitable giving should be a top priority among those trying to build personal wealth. Still, when one is just starting out, finding the funds to give away isn’t always easy. Fortunately, there are a few ways anyone can kickstart their giving to see a dollar-and-cents return.
Ways to Give Without Impacting Budget
Money is the easiest way to give charitably, but it isn’t the only way. Here are a few tips and tricks to being charitable without draining a savings account:
Everyone has clothes they don’t wear, books they don’t read, and toys they don’t play with. Instead of rotting away in the back of a closet, these items can directly benefit people in need. While some charities are less choosy about the items they accept, others are particularly organized to use specific items for good; for example, charities focused on boat donation are finely honed to evaluate, refurbish, and sell watercraft, but they have little use for dollhouses or socks. Thus, donors need to be careful that they donate the right items to the right organizations.
Give Through Employers
Some employers offer benefit programs that match employee charitable contributions. Larger corporations will even match donations 100 percent, effectively doubling their impact. Workers can consult their HR departments or company websites to determine whether there exists a charitable matching program at their place of work. If there isn’t, a worker might drive the creation of one.
Use Giving Apps
Charity has gone digital, and there are several apps available to help people give during their daily lives. Here are a few popular options:
- Donate a Photo. For every photo received, Johnson & Johnson will donate $1 toward a designated charity.
- Charity Miles. For every mile traveled via walking, running, or biking, corporate sponsors will pay $.25 to one of 35 participating charities.
- Feedie. Participating restaurants donate to the Lunchbox Fund for every image of their food shared on social media.
- Charity Tap. For every tap, the app donates a grain of rice to the World Food Programme.
From the SCCBS survey, there is little indication that volunteering increases wealth. However, at the very least, doing good deeds has a positive impact on the community and triggers one’s sense of fulfillment. Until a person can increase personal wealth in other ways to give charitably, volunteering might be the only outlet for the drive to do good.
Subscribe to get the free Master Your Money course!
Join the free email course and finally learn how to manage your money better, pay off debt, save more money, and reach financial freedom. Get our newsletter and get access to the freebie: