Many people value the ability to give part of what they have earned to causes they deem worthy. Whether it’s to a local church, a medical organization, or an animal rights group, giving can make you feel good.
In this article, we will be discussing the financial and personal benefits of charitable giving. We are discussing charitable giving as a part of our series around questions to ask your financial planner during an annual review meeting.
Financial Benefits
First, we will go over the financial benefits of charitable giving. While you may not be donating primarily because of the tax incentives, it is good to know how donating to charitable causes may reduce your taxes.
When making a charitable donation of either goods or money, there are specific guidelines that you must follow to be able to claim a deduction on your federal income tax return, including:
- donating to an IRS approved organization (see section 501(c)(3) of the IRS tax code),
- keeping proper documentation of your charitable giving, and
- making sure you make the donation by the end of the corresponding tax year.
Another way to benefit financially from your charitable giving is to use a donor-advised fund (DAF), which allows you to place money in an account to be donated over time to organizations of your choosing. A DAF is basically an account you can use to administer your charitable giving, as well as invest the resources you place in it. With this kind of fund, your money can grow tax-free so that you are giving more than just what you originally set aside.
If this is something you are interested in exploring, a certified financial planner (CFP®) could help you set up a DAF. To get that process started, you might want to think about which organizations you most admire, which values you hold most dear, and how you might direct your resources to meet pressing needs you notice in the world around you.
Personal Benefits
Now that we have addressed some financial benefits of charitable giving, we will look at the personal, or non-monetary, benefits. You could even argue that these benefits are greater than the financial ones.
One of the most obvious benefits of charitable giving is the opportunity you have to help those who are in need. When you donate either time or money, you are likely doing it with the goal of making things at least a bit better for people who might otherwise struggle alone.
There is even scientific research that suggests that helping others can make you feel good. Altruism may be something your family has always held dear and lived out, or, conversely, you might have been the recipient of aid when you were younger and in need, so that you now want to “pay it forward”.
Additionally, charitable giving can create a sense of community. Think how often there are local or world tragedies where a community comes together to support those who have been affected. Assisting people collectively may lead to more, longer-term connections between those who suffered and those who helped them.
Another benefit of charitable giving is that you may develop a feeling of personal connection to the cause you are supporting. Maybe you saw a commercial or a presentation about a specific need and felt prompted to give. Knowing that the problem exists may draw you to learn more about the situation and potentially get involved beyond giving.
Finally, charitable giving can be part of the legacy you leave to your children and their children. Modeling the value of donating and giving back can have long-term effects for you, the coming generations, and the world. In addition to showing your family how to give in practical ways, allowing them to be a part of the giving process may set them up with a giving mindset.
3 Steps To Start Getting The Benefits Of Charitable Giving
1. Do Your Research
Doing your own research is an imperative first step. While organizations need to follow specific guidelines in order to become and run as a non-profit organization (NPO), there are non-profits that don’t live up to the ideals their name implies. As much as you may want to help with a specific cause, please make sure the organization you are giving to is one that truly matches your values with their actions.
2. Set An Annual Gift Amount
You might want to decide each year, based on your budget, how much you would like to give. This can assist you in being intentional about and accountable over your charitable giving. Setting time aside to do this can give you a chance to really think about:
- How much you want to give;
- What types of organizations you would like to give to; and
- Help you think of ways to give time and resources beyond your finances.
If you would like help navigating the financial arrangements this would require, feel free to contact us to set up a meeting with a CFP®.
3. Involve Family
Beyond just setting an example for your children by what you’re doing, why not give them a chance to be involved? There are a number of ways to do so, such as:
- If they are old enough, you can have them do some online research on an organization they would like to give to;
- Letting them help pick one of the charities you decide to give to; and
- Encourage them to visit or volunteer at a local non-profit with you.
At Iron Point Financial, stewardship – including family financial stewardship – is an important part of our mission. That’s why we take the time to get to know you, so that we can best serve you, your family, and the causes you care about. We are committed to helping you use what you have been blessed with to help others in a way that reflects your beliefs and values.
Start Reaping The Benefits Of Charitable Giving Now
If you are ready to reap the benefits of helping others with your finances, but don’t know quite where to start, it would be our joy to help.
You can schedule an appointment today to meet with an Iron Point Financial CFP® and discuss your finances, values, and goals, and to start charting a holistic roadmap for your giving and any other area of finances you can think of.
Iron Point Financial is here to empower you to secure a brighter tomorrow. We operate physical offices in Grove City, PA and Greenville, PA.
We primarily serve residents of Pennsylvania, Ohio, West Virginia and Florida but we also have security registrations for 22 other states across the continental USA.
