‘Tis the Season

Most people know the story of the Good Samaritan.  He helped an injured person of another faith and gained no personal advantage from doing it.  That is important, but what is also important is that the Good Samaritan had money.  He paid the innkeeper for the injured person’s care.  If the Good Samaritan had had no money, we would probably not know about him. 

Charitable intentions are good, but charitable works require resources.

Hanukkah, Eid ul-Fitr, Yule, Kwanzaa and many other belief systems  have a celebratory season that more or less coincides with Christmas.  No matter your faith, for many, this is a time to consider charity and charitable works.

It has been my experience that people overlook the essence of charities.  The work they do is important and we support the charities that solve the problems we think are important.  But, charities serve another useful purpose.  They are our personal proxy in the doing good realm.

For most of us, money is easier to come by than the time it would take to do what a charity does.  We use money instead of direct participation so that other skilled people can do the work and we can conserve our time.  In economics this is called “Comparative Advantage.”

Charities build structures to complete their work.  Your charities count on you because the structure is expensive to maintain.  They need you.  Pay attention to your role as a donor, you would not be easy to replace.

There are many organizations seeking money to complete their work.  The last survey seems to be 2003.  There were then more than 160,000 charities and non-profit organizations in Canada.  About half registered charities with CRA.  Today they are more than 100,000 registered charities, so I suppose there are probably 200,000 or more altogether.  That is a lot of competition for only a few dollars.

Competition means that the charity and the donor must be maximally effective.  Charities must use resources better and donor must find efficient ways to give.  For a donor efficiency means getting more money to the charity for the same out of pocket cost.  In Canada giving appreciated shares in publicly traded corporations is a good way.

Consider also the idea of “Planned Giving.” Notice that when you pass on, it may be very difficult for the charity to replace your donations. Properly structured, you can become a “perpetual donor” for your church or other charity.  Remember them in your will or in other ways.  The capital you leave can earn income that replaces your regular donations.  $50,000 invested at 5% will provide about $50 per week.  Properly planned, there is little, sometimes no cost, to your heirs.

Even Homer Simpson could participate.  “I don’t mind being generous, as long as it doesn’t cost too much.”

Merry Christmas to all.

Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario. don.s@protectorsgroup.com

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