Christmas is the giving season. We enjoy the excitement of children, the smiles of loved ones and the warmth of company. To give is a deep human need.
The Christmas gift idea is wonderful and brings joy to us all. It is a little superficial though.
“Then the Grinch thought of something he hadn’t before! What if Christmas, he thought, doesn’t come from a store. What if Christmas…perhaps.. means a little bit more!” Dr. Seuss
Giving matters all year round and giving well can change a life or even the world.
Without thought, giving is difficult to do well. There is a template.
What should you give? Time, skill, or money? For most of us skill is available, but perhaps not focused enough to be a value. Time is the scarce resource, so money becomes the tool. It is a comparative advantage thing. For people who are better at earning money than providing the required service, earn money and pay others who are skilled to provide the service.
Who should get the money? Ideally the people who need it, but that is difficult. Ofttimes they are remote. Other times they do not know what to do with more than a little money. An intermediary can provide the links.
Some intermediaries are in the business of gift receiving and the throughput to the nominal needy is embarrassingly small. The overhead to gather money and operate the administrative layer of some charities is prohibitive. Canadian magazine MoneySense published a list of the top 100 charities in Canada in their December 2015 issue. The organizations are ranked on program efficiency, fundraising efficiency, governance and reserves. Each of us would rank these parameters differently. Some would look only at fundraising costs and charitable efficiency, while others may take a longer look and care about governance and reserves. No matter. Look for the ones that suit you.
The list is 100 names long. In Canada that is fewer than one in a thousand of all the possible charities.
In the more general case consider
- The charity performs a service that is personally fulfilling for you
- The charity is in the business of fulfilling that purpose and is not a way to enrich executives.
- The charity has reserves that will permit it to carry on in bad times, or to meet an emergency need.
- The charity provides efficient way for donors to contribute.
Many people become more than annual donors. Planned giving is an important aspect of building reserves. When a donor stops, usually by death, where do those donations come from? Becoming a “perpetual donor” means donating capital such that the income from it replaces your annual donation.
There are efficient ways to donate. New life insurance is one powerful tool. Highly appreciated securities is another. Consider giving away your taxes. Old life insurance donated at fair value is interesting. Sometimes remainder trusts and charitable annuities work. The techniques are out there and with a little guidance many can provide important assets to the right institution.
“What we have done for ourselves alone dies with us; what we have done for others and the world remains and is immortal.” Albert Pike
Take it to heart.
Merry Christmas to all.
Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.