In all seasons, but especially during the holiday season, gifting often comes up. I continue to be amazed at the generosity of so many of our clients. Over the years, I have learned a lot about giving away money, what works and what does not work so well. Here is a simple framework of thoughts to help guide you.
Start Early. Whether gifting to charities or to children, most families don’t start early enough. Just as with saving and investing, giving is a muscle we must regularly exercise, or your capacity for giving will never fully materialize. It’s too easy to tell yourself you will start giving once you reach a certain level of financial security. I would argue, as I have many times before, that achieving a solid level of security is EASIER when you regularly give money away. Giving regularly forces discipline, and discipline builds security. It’s backwards, I know, but the more freely you give, the more in control you feel with what you keep.
Maintain Prudence. Prudence is the ability to govern and discipline oneself by the use of reason. Giving away your money should be a financial decision, not an emotional one. We can’t buy our kids’ love any easier than we can buy our way into Heaven. Granted, it feels good to give, and we certainly benefit ourselves personally from our generosity. But I would encourage you to give in a way that makes financial sense. We have to be intentional, do our homework, seek guidance, and maintain a disciplined approach to our giving.
Be Wary. Caution goes along with prudence. Generally speaking, if a charity or even a family member is using heavy emotional tactics to get you to write a check, slow down. The emotional pull of an advertisement, presentation, or ask can undoubtedly help reveal a worthy need or cause. However, you should not commit right away. Pause, research, and plan out a solid course of action, then give with confidence.
Minimal Strings. I’ll admit this one may be debatable, but I believe in giving without strings attached. When I decide to give, I want it to be a gift, not a transaction. The moment I start attaching conditions, I’m no longer being generous; I’m trying to stay in control. Faithful giving means releasing that control and trusting the recipient to steward it well. Sometimes it won’t go the way I hoped, but that’s part of the deal and part of the growth. Special note: when gifting primarily for estate tax reasons, this point does not apply.
We have many planning and execution tools available for those who want to sharpen their gifting strategies. The above guidelines are the foundation of what we believe to be fundamental to any giving. From there, over time, we can help you design an effective plan so your resources can change lives and have a real, meaningful impact on the causes you care about. All it takes is a little work and planning.
Those are my thoughts, and Happy Thanksgiving!
Rob Schulz, CFP®