Thursday, April 3, 2014

Saving money vs. saving people

This is one of those think-out-loud posts.  Definitely one of those I-don't-have-the-answer posts.

I know what the question is, though.  In a generic form the question is, "how do I plan for saving for my own wants, on the one hand, and giving money to charity, on the other?"  Am I saving money or saving souls?  Am I rich in dollars or donations?

It's a philosophy question, really, not a financial one -- although certainly the financial aspects poke and prod me to think about this in ways that are tangible and distracting.

For me, the importance of sharing is so important that it's already woven through almost every aspect of my family's financial life.  Automatic deposits?  When my employers pay me, they deduct a bit of money from my paycheck for United Way.  Checking account?  When I get my paycheck, I tithe to our church on the take-home amount.  Credit card?  Every month, my credit card bill contains payments for our three sponsored children around the world.  And that doesn't even include our annual summer give, or occasional random donations to our local food bank, or money we micro-loan through Kiva, or non-monetary donations like books and blood and food.

All this is to say, the question of how much to give to charity isn't hypothetical or rhetorical in this case; it's one that I bump up against regularly, the same way many people think about, I don't know, the cost of transportation.  It's just there.

I wrote above that charity is woven through almost every aspect of our financial life.  One of the biggest exceptions is retirement savings, because retirement is . . . well, it's just a mess of a 401K/403b/IRA gobbledy-gook of a financial code.  It doesn't have anything to do with giving; it's all about keeping.

I've known good-hearted people who were weak-minded enough to let charitable impulses wreck their savings.  That's not me.  In spite of all I think about how to give my money away, our charity:retirement allocation ratio is something like 1:4, so our giving still pales in comparison to our keeping.  We're solidly on track for me to be able to retire several years before my college officially allows me to -- in fact, I might keep working a few years longer than I need to just so I can earn the title "emeritus" and the perks that come with that title.

And all of this affords me the luxury -- and I believe, the obligation -- to think about whether and how to give more.  You can call it liberal guilt, or you could say I believe that the Lord of the Universe occasionally tells some of his rich young people to sell all that they have, give to the poor, and follow Him, or you could point to popular psychology that says people who share wealth are happier than people who don't.  I'm sure my real motivation is somewhere in the swirl of all of those.

My current dream-solution is a donor-advised fund, like these ones at Vanguard Charitable.  A donor-advised fund is basically money you invest in the stock market (in this case, an index fund), but you promise the money will all go to your designated charities.  In my head, it's the philanthropic counter-balance to a 401K.  If I opened up one of these babies, I could save for retirement needs in one account and retirement charity in the Donor Advised Funds . . . and so this one aspect of my financial life that seems still so self-serving could be a little more other-serving, too.

BUT, the fund requires a $25K deposit to open the account in the first place.  And every time I think we might be getting to the point where we might get close to pulling that much money together, other life things pop into the way and gobble the money up.

So for now, I just keep looking at our savings account, with its pile o' money roller-coastering up and down.  And I pretend in my head that I'm putting all that money toward charity, but in practice I keep spending it on silly things like dentists, or schools, or taxes.  I'm not even really sure that a donor-advised fund is the right thing for someone like me to do . . . but at least I get to keep thinking about it out-loud, even if I don't know the answer.


  1. I think in your situation, I would start putting that money into vanguard IRAs (probably Roth) at the max per year, either just in some cash/bond fund or in S&P index. Then when it hits 25k in a few years, move it to the donor fund. If you're already maxing with iras, then in a few years you'll be able to move the money.

    1. Thanks for the advice; I needed to hear this.

      I'd been contemplating this; it's hard to decide how much to move out of savings just because of the roller-coaster-ish ride we've had lately and might have in the next few months. But I think you're right; I should just get started and then worry about dentist/school bills if and when they come. -MM

    2. Remember that you can withdraw your contributions from an IRA Roth without penalty (just not the earnings).

      And you don't need to put away all your money at once. Emergency funds are important too. But if you do some every year, you'll hit that 25K limit and will be able to switch to the right kind of funds with your tax-advantaged retirement savings, which is the best of both worlds. It doesn't have to be 25K now or it all stays in savings.

  2. I don't have a good answer to you although n&m's strategy sounds like a good one. Just wanted to thank you for your perspective on giving - it's certainly changed the way we contribute. We still don't give enough - trying to get it up to 5% of gross earnings, but we do contribute out of each paycheck now (makes it much easier). & every raise we get, we've been splitting between charity/savings/retirement so it's creeping up incrementally.

    1. Thanks for the encouragement. That means a lot.

      In terms of amount of giving, it helps to be older --- partly because we've already bought most of our big purchases, partly because we've learned ways to spend less money on the small regular purchases, and partly because we're making more money now. That's a powerful combination that I didn't have even ten years ago. -MM

    2. Frugal Ecologist--that's what I did and it worked for me. I think I started around 3% once I got a full-time job and got up to my goal of 10% and then got up to 10% + extras.

      The extras are things that are technically charity but actually help me or used to help me (public TV/radio, wikipedia, local wildflower center, other local issues) and loans or subsidies to friends and relatives.

      (My percentage is just of net earnings, though--I'm hoping at least 10% of my taxes are going to help others, too!)

      Miser Mom, I've never thought of a donor-advised fund. I'd rather donate all the money I can/am willing to ASAP. And then I also think I might include charities in my will (though currently they are not included).

      Hmm, you're reminding me I really need to re-think my will. At first I had very little and willed it all to my Mom who is the most responsible and fair-minded person in the family and will dish it out well (an my sister second--same reason). Then I got a long-term boyfriend and decided that shouldn't mean my family gets nothing--so right now he gets the (paid-off!) house and my mom gets everything else.

      But now I'm thinking there's enough extra money for me to split the extra between my family and charities, and my family will still get a nice pile, even if they are all still around by then.

      I'm surprised you find encouragement helpful; you might be the most generous person I know (even while keeping all the extra savings for yourself).

    3. Thanks Debbie M; I like the thinking.
      And *everybody* needs encouragement! -MM

    4. In that case, you go! And everyone else, too!

  3. If you want something with a lower buy-in, check out Fidelity Charitable for a donor advised fund. Their minimum is $5k.