How much should I be giving each year?

For a number of years I have had the good fortune to work as both a fundraiser and as a grantmaker across three continents – North America, Australia, and Asia.

In my work, travels, and research, I have come across a number of different ‘protocols’ or ‘norms’ for personal giving. Everything from Giving While Living, the philosophy and practice of Chuck Feeney, who irrevocably gave away 99.9% of his billions while he was in his fifties, to those who believe that they should leave all of their wealth to their family in their last will and testament.

I have come to the conclusion that waiting until you die to give away your wealth is irrational. Even foolish. Where is the joy from the cemetery? Where is your active involvement when you are in the cemetery? Where is the mental stimulation and problem-solving? And how many people will have experienced prolonged suffering, sadness, or simply missed opportunities because you gave then and not now?

While I often work with high net-worth givers, I have always been searching for a giving norm that could do two things:

First, it could work for everyone – from the battlers to the billionaires, and

Second, it was modest enough and reasonable enough so that everyone could at least give it a go. Because I believe that until you give, and give regularly, you don’t understand the real personal benefits of giving, and you don’t really understand all of the various aspects of money – making it, saving it, investing it, spending it, and giving it. And giving regularly will permanently change you. For the better.

So, for me, it’s fundamentally about learning. Just like any new skill, you have to learn it. First, you need to know what you want to learn, then you need to find out who the good role models are, and to take the necessary actions based on your preferred role model (even if it’s in very small initial steps). And finally, you need to keep working at it, and learning how your actions are getting you closer and closer to your ideal new behaviour and your desired outcomes.

Some time ago I learned of a group in the USA called The One Percent Club*. They promote the norm that we all should give at least 1% of our net worth (net assets) each year to those less fortunate. They don’t specify that it is to go to a particular charity. They are not trying to raise funds. They simply say give away 1% of your net worth (net assets) each year.

I like the idea of giving away a percentage of assets per year, not income, because your net assets are your accumulated wealth over your lifetime, and include all that you have inherited.

Another thing I like about this ‘new normal’ is that everyone can give in proportion. What I call proportional generosity. No one will feel left out. The battler with only $100,000 in net assets who puts $20 per week into the church collection basket will end up giving away at least $1,040 per year. More than 1% of his or her’s net assets.
And I would argue that it’s harder for the battler to give that 1% away than it is for the billionaire.

Is 1% of your net worth too much for you? That’s what I call the platinum standard for annual giving. Take a look under Metrics on this web site for the gold, silver, and bronze standards. Where there’s a will, there’s a way… find a way!

Do you know how much accumulated personal household wealth (not corporate wealth) there is in Australia? It’s estimated to be $6 trillion.

Do you know how much 1% of $6 trillion would be? $60 billion to charities and not-for-profits in Australia each year. Every year. Imagine what a difference that would make!

That’s why I started this website. To renew and expand the debate about ‘What should the giving norm be in Australia?’ and ‘What should I, personally, be giving away each year?

igiveonepercent.org is not a charity. It is not a foundation. I am not looking for your money.
I simply want to promote the belief that, in the end, life is about giving. And until you give, and give on a regular basis, you won’t really understand, in the marrow of your bones, how wonderful giving really is – for everyone. Especially for the giver.

I give 1% (gold standard) Every year.

Can you help make it the ‘new normal?’


*www.morethanmoney.org/articles.php?article=The_One_Percent_Club_A_New_Tithing_Strategy_190.

© Copyright Dr David Kennedy, 01 December 2012.

About us

This website is sponsored by Dr. Dave Kennedy. As a recipient of a number of academic scholarships that have transformed my life, I know, very personally, the value of receiving. As an experienced fundraiser and grantmaker on three continents (North America, Australia, Asia), I have been taken aback by how fortunate my life has been and how much need there is for giving in today’s world. And I have been humbled and heartened by those who give, and give regularly – large givers, small givers, and givers in-between. But most importantly, I have been astounded by how regular giving has changed me.

igiveonepercent.org is not a charity. I don’t have “favourite charities”. This is not a foundation. I am not asking you for money. I don’t accept money from any government. This is not a for-profit venture.

I simply want to promote the idea of planned, sustainable, annual giving, in one form or another.

Figure out a way to start giving. How much, to whom, when, anonymously or publicly – that’s all up to you. It’s your money!
But don’t wait. Get started today. Until you learn to give, and to give regularly, you won’t really appreciate how joyous it will make you feel. It will change you. Irrevocably. For the better.

As I develop this website, I will add more information on how to give, why it’s good to give, and who is giving 1% of their net assets each year, rich and poor, and in-between.

Favorite Quotations & Aphorisms

“Gather all you can. Save all you can. Give all you can.”
– A Quaker proverb

“There is no wealth but life. Life, including all of its powers of love, of joy, and of admiration. That country is richest which nourishes the greatest number of noble and happy human beings; that man is richest who, having perfected the functions of his own life to the utmost, has also the widest helpful influence, both personal and by means of his possessions, over the lives of others.”
– John Ruskin (19th century British poet, writer, and philanthropist)

“Life is service – the one who progresses is the one who gives his fellow men a little more – a little better service.”
– Ellsworth Milton (E. M.) Statler (hotelier and philanthropist)

Our Mission

Inspired by the Giving While Living philosophy of Chuck Feeney, igiveonepercent.org is a not-for-profit initiative with a mission to enhance peace, good will, and personal happiness by increasing individual and corporate giving at all levels of society. We promote a “new giving norm” (the new normal) for annual monetary giving to charities and not-for-profits. We suggest you give up to 1% of your Net Investable Wealth (NIW) each year. NIW is your Total Net Worth less the equity value of your primary residence.

The practice of giving away money annually is a multi-faceted skill that is only learned (and appreciated) over time. The amazing thing about giving away 1% of your NIW annually is that you will ALWAYS have your primary residence to live in as long as you live, and you will ALWAYS have 99% of your additional Net Worth to live on. ALWAYS, by definition. No fear! More importantly, you will experience the sheer joy of giving on a regular basis! Now, you can wait until you die and leave all of your assets in your Last Will and Testament, or you can get on with it – deliberately, prudently, and joyfully. As my mentor Chuck Feeney told me: “There isn’t a lot of joy in the cemetery.”

 

Metrics

As a fundraiser and grantmaker, I have long held the belief that philanthropic advocates use the wrong metrics when talking about giving norms. Instead of advocating that individuals give a percentage of their annual income, I suggest the standard should be a percentage of their net worth (net assets). In essence, when planning and budgeting for giving, I think folks are using the wrong base to work from.

Here’s why:
• Income may fluctuate from year to year. This complicates giving in a number of ways, not the least of which is planned giving.
• Income can be defined in a number of ways, and is substantially impacted by taxes and related accounting protocols.
• Assets, on the other hand, are more tangible, and can be assessed fairly easily at current market value.
• Assets reflect the appreciation and amalgamation of stored income over a lifetime, and often over several lifetimes. If you inherited some of your wealth, then you know well the value of giving.
• We may seek to minimize our annual personal taxable income, but we typically want to maximize our net assets over the longer term.

And I like a small percentage, like 1% because it’s do-able. It’s a reasonable starting point. Any new behaviour has to start somewhere, so make it an easy start!

It’s only one-hundredth of your total assets. That means that each year, no matter what you give away, not matter what your annual rate of return is, no matter what your marginal income tax rate is, you still have 99% of your wealth left. No fear! By definition, you will never run out of assets! Even if your pile diminishes over time, each year you will always have 99% left.

The Platinum Standard

The Platinum Standard for calculating 1% of your net assets is simply to add up the value of all of your assets (home, superannuation, investments, savings, etc.) and subtract all of your liabilities (i.e., any loans or debts held against your assets). This dollar ($) amount is your net worth or net assets. Then multiply this by 1% (.01). The product of that multiplication is your giving goal for this year.

So, if your net assets are $100,000, your annual giving goal is $1,000.
If it’s $1,000,000 (one million), your annual giving goal is $10,000.
If it’s $1,000,000,000 (one billion), your annual giving goal is $10,000,000 (ten million).
If it’s $10,000,000,000 (ten billion), your annual giving goal is $100,000,000 (one hundred million).

I remember having this conversation with a friend of mine. He said, ‘We have at least one Australian reportedly worth more than $20,000,000,000 (twenty billion dollars). At one percent, that means giving away $20,000,000 (twenty million dollars) per year.’ To which I added: ‘You need to add another zero my friend! One percent of $20 billion is $200 million each year. Every year!

Everyone can give 1%. From the poorest person to the richest. And everyone can give in proportion.

In fact, it is arguably more difficult for the poorer person, on average, to give 1% than the richer person. Because the poorer person is still trying to accumulate the basics (e.g., a roof over their head, basic transportation, reliable work, etc.), while the richer person passed this benchmark long ago (for some, their forebears passed this threshold a generation or more ago).

Proportional generosity. Is it possible that a person with modest net assets is more generous, proportionally, than a wealthy person? Yes! The person with $100,000 of net assets who gives away 1% each year (i.e., $1,000) is proportionally more generous than the billionaire with net assets of $1 billion who gives away $5 million each year. Because, despite their wealth, the billionaire has only given away ½ of 1% (.5%) of their net worth while the poorer person has given away 1%.

And, giving away 1% of your net assets each year won’t cost you that much time when it comes to that all-important investment question: “How long will it take to double my money?” Don’t believe me? Then calculate it for yourself.

First, assume a long-term return-on-investment (ROI) that is realistic for you (for some, it could be as low as 4%; for others, it could be 10%, 20%, or more). Then estimate how many years it will take, after taxes, to double your assets.

Then, using the same ROI figure, but now deducting 1% of your assets each year to allow for the monies given away, calculate how many years it will take, on average (after taxes) to double your money. Were you surprised how little difference there is? One additional year? Less than 1 additional year? Several months?

Surprised? I was! And so is just about anyone who takes the time to do this calculation.*

The Gold Standard

Is the Platinum Standard too high a standard for you? That’s understandable. It is for most of us. And difficult to achieve because for most folks their largest asset is highly non-liquid because it’s their home.

So, we suggest the Gold Standard as your aspirational giving target. The Gold Standard is 1% of your net near-liquid assets. I define net near-liquid assets as your net assets less the equity value of your primary residence.

To calculate this, simply deduct the equity value of your primary residence (the market value of your home less the value of your outstanding mortgage) from your net assets. Then multiply your net near-liquid assets by 1% (.01). This is your annual giving goal.

For most of us, our home is our biggest asset, and by definition, it is not a liquid investment. And while we are alive, we will always need shelter. So exclude your primary residence, and give 1% of what you have left. (And please resist the temptation to exclude your second home, your third home, etc. if you are fortunate enough to have homes in abundance.)

For many Australians, your net near-liquid assets will essentially be the value of your superannuation. For some, it’s your superannuation plus your additional shareholdings, the equity in your investment properties, etc.

The Gold Standard is much easier and much more do-able than the Platinum Standard. Now, for all practical purposes, if you are a billionaire, the difference between your giving 1% of net assets (the Platinum Standard) and your giving 1% of your net near-liquid assets (the Gold Standard) is not going to make much difference. But for most of us, it will make a big difference, and is frankly much more realistic.

The Silver Standard

Is 1% of your net near-liquid assets too much? Okay, then use ½ of 1% (.5% or .005) of your net near-liquid assets. What I call the Silver Standard. So if you have $100,000 in net near-liquid assets, your annual giving goal is $500 (five hundred dollars).

The Bronze Standard

Is ½ of 1% still too much? Okay, then use ¼ of 1% (.25% or .0025) of your net near-liquid assets. What I call the Bronze Standard. So if you have $100,000 in net near-liquid assets, your annual giving goal is $250 (two hundred and fifty dollars). That’s about $4.81 per week over 52 weeks.

And if your favourite charity is a tax-deductible charity, and you have a receipt for your donation to this charity, you can claim a tax deduction on your federal income tax return.

Tax-deductible giving. For example, if your marginal federal income tax rate (your top rate) is 19%, the federal government will allow you a credit of 19% of the value of your deductible gift against your owed taxes. In the case of a $250 gift, that credit (after you have received your income tax rebate) will be worth $47.50, meaning that the net cost of the $250 gift to you will be $202.50 (or $3.89 per week).

And if you are in a higher marginal income tax bracket (say, 32.5%) the after tax cost to you of this $250 gift is only $168.75 per year ($3.25 per week).

Here’s the real point: Try it! Get started on giving! Keep working at it. Aspire to get to the Silver Standard, and then to the Gold Standard!


*The folks at the One Percent Club, using an average annual return of 7%, estimate that instead of doubling your money in 10 years, it will now take you 11 years (please click here). But since each situation is unique, do your own calculations or have a professional estimate them for you. It’s well worth it!

Caveats

There are no caveats.

Some will argue that no one should advocate some ideal level of annual giving or some cultural giving norm. And they are entitled to their opinion.

But here’s my opinion: If you don’t keep score, in any game or aspect of your life – such as your weight, your tennis match score, your income and expenses, your investment portfolio, etc. – you’re not really playing, you’re just fooling around…

And if you don’t have a giving goal, and a giving plan, then how can you be sure that you have set aside the funds, in a liquid form, to make your gifts within your planned timeframe of one year?