Like many people, for most of my career, I never set an explicit goal for giving to charity. While I was raised to believe that everyone should put something aside for those less fortunate than themselves, in practice, I mostly gave only when I was asked. Sometimes it was a friend running a marathon for a worthy cause they had a deep connection to. Other times it was a fundraiser for one of the schools that my children attended. But overall, it was reactive, not proactive.
This all changed for me in 2011.
I first learned about donor-advised funds when LinkedIn went public in 2011. All of a sudden, private wealth managers became ubiquitous on campus. Part their sales process, as it turns out, was to promote the tax-deductible benefits of giving to charity through donor-advised funds.
The concept of a donor-advised fund appealed to me, but it raised an important question: how much should you contribute to a donor-advised fund? I had no idea.
Fortunately, at the time, my accountant recommended a fairly simple approach: take whatever amount you plan to give to charity every year, multiply it by ten, and contribute that to a donor-advised fund. The best part? By investing the money upfront in a donor-advised fund, I could potentially fund years eleven or twelve with the proceeds.
For the first time, I was forced to answer what should have been a very simple question: how much did I want to give to charity every year?
At the time, I chose $20,000, which was 10% of my base salary at LinkedIn.
More importantly, I now had a giving goal. And it changed everything about the way I give.
The Two Hard Problems With Giving
It turns out that there are two hard problems inherent in giving money to charity:
- How much can you afford to give?
- Who should you give the money to?
Until I had a donor-advised fund, I never realized how much the first problem influenced my generosity. But every time I was asked for a donation, there was friction as I tried to figure out what I could afford. However, once I had a giving goal, the first problem largely went away. As a result, I found it easier to give when I found an organization or cause that I believed in.
More importantly, the goal made me more generous. While the donor-advised fund did not change the amount that I thought I should give to charity, it did change the amount that I actually gave to charity. Looking back at my records before 2011, it is clear that having a goal increased my actual giving by more than 100%.
This shouldn’t be surprising. Behavioral economists have known for a long time that pre-commitment can dramatically increase the amount that people save for retirement. Why couldn’t it also work for giving?
This is the reason Alejandro & I started Daffy.
Set Your Giving Goal Today
Our research shows that when asked, most people intend to give a larger amount to charity than they actually end up giving in practice. At Daffy, we call this difference the Generosity Gap. It may sound like a small thing, but we believe that if everyone set a giving goal, it could increase the money given to charity by more than one trillion dollars over the next ten years.
Every year, we set goals for ourselves. Financial goals. Fitness goals. Diet goals.
Until 2011, I didn’t know what a donor-advised fund was, and I didn’t have a giving goal. But in 2022, you can sign up for Daffy in minutes, set a giving goal for the year, and have an app at your fingertips anytime you find the desire to give.
This year, consider setting a goal for your giving and be the generous person that you want to be.