Merry Christmas

Hanukkah, Eid ul Adha, Yule, Rohatsu, Kwanzaa are celebrations that more or less coincide with Christmas.  To everyone, my wishes for your success and comfort.

No matter the faith or absence of faith, at this time of year many consider the giving of gifts, charity and charitable works. That begs the question, “What is the point of charity?”  After all, it is essentially the exchange of something for nothing and as such not so logical.

The value is value for others.  That is important because we all live and interact with others.

Most of us give money although we could give time, special skills, or other values.  Money is, by far, the most common.   There are two ways to go about charity.

  1. Point to point
  2. Institutional

Point to point is person to person and we do it for several possible reasons.  To help a particular person overcome some adversity, to provide them with an opportunity, or maybe to merely have them enjoy something outside their normal realm.  All are useful and welcomed.  The Good Samaritan is a fine example of overcoming adversity.

Recall the important element of the story; the Good Samaritan had resources and chose to use them for the benefit of another.

Institutional giving is more complicated and in some ways more valuable.  Why should a pragmatic person care about charities as opposed to doing good themselves?

For most of us, money is easier to come by than time.  We use money instead of direct participation so that other skilled people can do the work and we can conserve our time.  They may not be as good at making money as we are and we are not as good at carrying out the needed work. In economics this is called “Comparative Advantage.”  It is a form of specialization.

A charity is our proxy for carrying out works we believe are important.

Organized charities carry out their works more efficiently, sometimes cheaper, usually faster and often for longer. We give money so they may achieve our desired outcome.

Our role as donor is worthy and important.  Be aware of what results the charity achieves. We may end wasting our money if they are inefficient.

There is information available about “bad charities.  This story is an example.  Kids Wish Network and no, it is not the one that came to your mind – The Children’s Wish Foundation.

For the longer term, consider the idea of “Planned Giving.” There are efficient ways to provide capital for charities so that they may use income form that capital instead of relying on day-to-day gifts.  After fundraising costs, the day-to-day may be quite small.

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.”

There is a difference between charity and generosity. Generosity is more about attitude.    This story about Mark Cuban reported in  INC.com makes it clear.  No matter our financial status, we can all be generous.

Merry Christmas to all.

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

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