You’ve probably heard sayings like “The more you give the more you’ll get”, “Give and you’ll receive” etc. It’s not clear exactly how it works but it does seem to work. Most successful people like Bill Gates and Melinda French Gates are involved in philanthropy but you don’t need to be well off to make donations.
If you’re in a position to save then you’re in a position to donate cash to those in greater need if you want to. And if you don’t have spare cash then you may have time that you can spare to help others instead.
People make donations for various reasons including because they want to help others, they want to share their wealth and good fortune, sometimes they feel guilty about what they have and, for many, it just makes them feel good. Some people are quite public about their financial support, such as arts patrons or organization sponsors but you may prefer to be more low key or anonymous.
If this is a new journey for you and you’re not sure who to donate to, then think about the charities that you like or have some connection with, for example, a friend has cancer or your parent receives hospice care, you read about the work of Medecins sans Frontiers in war-torn countries, you want to contribute to your church, or you hear stories about the women saved by Womens Refuge.
Often you can make donations via the organisation’s website or they may have set up a GiveaLittle page.
But the easiest way to make donations is to either regularly support organisations through automatic payments from your bank account, for example annually or each payday, or through Payroll Giving. You can organize Payroll Giving through your employer’s Payroll section. The big benefits of Payroll Giving are that it’s easy, and you get the tax benefit of the donation immediately. More on this later. Or you may prefer to make one-off donations when you get a bonus or some event occurs that makes you want to make a donation. Or you could decide to donate your super when you become eligible. There are many options.
Make the amount at a level that you feel comfortable with and that you can afford without getting into trouble yourself financially. Some people recommend 10% but this can be a lot for many people.
If you choose New Zealand registered charities then you qualify for a refund of one third of the amount you donated. This means that the donation has only “cost” you two thirds of the amount donated. You now have funds to donate again if you want! For example, if you make a donation of $100 to a NZ registered charity then you can receive one third back from Inland Revenue. The charity still gets $100 but it’s only cost you $67. That’s $33 that you can do something else with. There are two riders to this.
First you generally have to apply for the refund. You can do this by completing an IR 526 Donation Tax Credit Claim form or directly via MY IR and attach the receipt. With Payroll Giving you receive the tax refund back into your paypacket in the period that you make the donation so you don’t have to separately apply to Inland Revenue.
Second you can only get a refund on donations up to the amount of income you’ve earned that tax year. So, for example, if you earn $100,000 a year and you give it all away then you can receive up to $33,333 back, but if you earn $100,000 a year and you give away $200,000 then you will still only receive back $33,333.
Leading by Example
When people see other people making donations or children see their parents giving, they learn to give too. This can be as simple as helping someone else do something.
One Christmas we told our three children that their main Christmas present was that we were going to sponsor a child, and they could choose the child. They chose someone who they thought wouldn’t be the first one chosen and that began our 12 year association with our sponsored child in Honduras. The children practiced writing to him in Spanish and they were always humbled to hear the things that our small contribution to his Christmas and birthdays was able to buy each year. All three of our children are now in their 20s and each has set up their own programme of regular donations.
When you have the financial pressures of mortgages and student loans it can feel difficult to justify making cash donations. But if you would really like to help others then volunteering your time can be just as rewarding to you and the donee. This may be as simple as offering to help weed an elderly neighbour’s garden, sit on the Board of Trustees of your children’s school or the local swimming club or even to volunteer for a few hours each week at a nature reserve, SPCA, hospice shop or to deliver Meals on Wheels.
Giving to get?
So how does the giving cycle around to getting? I’m not sure but the “feel good” aspect of giving probably reflects into everything else you do, making you more productive and think more positively. This in turn allows you to make good decisions which help you save and earn more money.
The information in this blog does not purport to be financial advice and no reliance should be placed on it. It is of a general nature only based on my experience as a Chartered Accountant in practice and specific advice should be sought for your particular situation.