The economic slump we’re crawling out of has done big damage all over the place: to employment, home values, businesses, and, of course, investment portfolios.
Put charities on the casualty list, too. Charitable organizations have been hit in multiple ways. Demand for charities’ services has risen because of the tougher economic times. Charities’ investment portfolios and endowments have been hammered. And charitable giving has fallen because so many individuals have suffered declining incomes and assets. Boston College’s Center on Wealth and Philanthropy estimates that charitable giving by individuals in 2009 was $217.3 billion, down more than $25 billion from 2 years earlier.
In our household, we know how lucky we’ve been. We didn’t lose our jobs, and our investments have mostly recovered from the markets’ downturn. Knowing the pressures on charities—my wife worked in the nonprofit sector for much of her career—we’ve been discussing how to make sure our own contributions of dollars and time do the most good.
One topic we’ve debated is how to budget for and prioritize our charitable contributions. We donate to some organizations regularly, and we occasionally respond to humanitarian appeals—aid for flooding victims in Pakistan, for example. But we’ve never really created a donating budget or set priorities for our giving. We’ve discussed whether relatively small donations are at all effective—a donation of $50 or $100 merely seems to elicit a series of follow-on solicitations that must cost a significant percentage of the original donation.
I chatted with Ben Pierce, executive director of Vanguard Charitable Endowment Program (an independent public charity that Vanguard founded in 1997 to allow investors to create donor-advised funds), about the topic. His fulltime job is thinking about philanthropy.
He said it’s probably most common for charity-minded individuals to budget a percentage of income for their giving. But he suggested a different approach.
“When you think about what to give next year,” he said, “consider making it a percentage of your total worth. It’s a different philosophy, but you’ll end up giving more of yourself, and thus be more invested in the success of your donation.”
He mentioned another idea—to make giving a family affair—advocated in a recent blog posting by Jack Brennan, Vanguard’s chairman emeritus and current chairman of Vanguard Charitable Endowment Program.
“However you budget your giving,” Ben said, “consider having a child or grandchild decide where to give the money. You’ll pass on your belief in philanthropy, inspire meaningful conversations around the holidays, and strengthen your bond as family members.”
Readers of the Vanguard Blog are a savvy and thoughtful bunch. How do you think about these issues of budgeting for charitable giving and involving your family?