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Radical Generosity, a Growing Family Ambition

Radical Generosity, a Growing Family Ambition
Charles Crowley, CFP®, AIF®
February 12, 2020

For young and growing families, it can be hard at times to justify a commitment to charitable giving. But philanthropy can take on several forms when it comes down to it. I’ve heard it referred to as the “three T’s of giving”- time, talent and treasure. All three are clearly very valuable aspects of our lives because each are finite in their own respect. As a wealth manager, I obviously see a great deal of focus placed on the monetary side of philanthropy and my professional experience tells me that our individual perspective on personal wealth is often a driver for assessing whether it is (or feels) appropriate to give away our money or things. The more you feel as though you have yet to achieve your own financial security, the more difficult it is to be motivated to give financially. Furthermore, when having a family to provide for, the decision can be increasingly difficult but arguably more important.

As I’ve gotten older, I have grown in my faith, and certainly as I’ve started a family, the concept of radical giving has meant more and more to me. To start with, there are very few things in this life that can replicate the feeling you get from being generous and having the financial freedom to afford it. It just feels amazing! I personally want to also ensure that my children observe our growing family making generosity a financial priority, and further understand that the blessings we enjoy come with a responsibility to give back. With that in mind, I’d like to share 5 tips that I believe will make building charitable intent into your family’s financial plan easier and more rewarding.

  1. Define what causes your family is passionate about

There must be an emotional tie to the cause or organization that you’re giving to for there to be motivation to continue the financial commitment. I would further argue that it is incredibly important to understand what cause(s) each member of your household might be passionate about for everyone to be fully on board. And this does include children, not just parents and/or breadwinners. An easy way to get children involved is to simply talk to them. Discuss what your giving plans are, and ask them about what situations, issues, or circumstances tug at their heart strings a bit. From there, you can help them figure out how they/the family can engage those causes with support (i.e. the three T’s). It also gives parents and kids something to tackle together, a concept I’ll circle back to at the end.

  1. Do not be afraid to start small and build the habit

I think the main thing to start with for budgeting purposes is to start with a digestible amount. It may be a percentage of your income or a flat dollar amount, but it must fit within your budget. To make it easier, try the following:

  • Once you decide on an amount, no matter the size, I recommend that it happen FIRST before anything else in your budget is addressed. Automate it even; have it debited immediately almost like a payroll deduction. The reason for this is that the charitable category is otherwise the first place stolen from when in a cashflow crunch – which is harder to do if it is already gone and done in the beginning!
  • Build up your giving over time. You may not be giving at the level or rate you would like to at first but there is nothing wrong with gradually climbing the ladder percentagewise over time. Maybe you give 1% of your income for a period of time, then bump it to 2%, then 4%, etc. Remember, too, that it isn’t always all about the money- there may be other ways that you can increase your charitable footprint when you aren’t able to give as much financially.
  1. Be smart about the how, not just about the how much

If you are going to give monetarily to a cause or organization, you want to consider all resources to ensure you’re taking full advantage of your charitable intent. Nothing is wrong with that, right. Below are a few items to consider speaking to your advisor about for tax efficiency and cashflow purposes before finalizing your charitable giving plan:

  • If you have highly appreciated securities or low-basis holdings in your investment portfolio, consider gifting those shares to your charity. The non-profit will be able to liquidate the security at their discretion without tax consequence, whereas you would have to take the tax hit if sold before gifting.
  • If you don’t have highly appreciated positions but you do have positions at a loss, consider selling the positions and harvesting the loss to utilize within your own taxes, then gifting the resulting cash proceeds to your organization.
  • If you are subject to a Required Minimum Distribution, consider executing a “qualified charitable distribution” or QCD. This is where you gift money directly from the IRA to your cause- the income here never hits your 1040 which is never a bad thing, you satisfy your RMD obligation, and you accomplish your charitable intentions.
  • Consider speaking to your advisor about a donor advised fund. Think of this as an investment account solely earmarked for the purpose of supporting the charitable endeavors you care about most. There are immediate tax benefits when the gift is made to the fund, the assets are invested and grow tax-free, and you have the ability to recommend contributions be made to specific public charities you support. They don’t make sense for everyone but can be a very effective tool in the right circumstances.
  1. Start a “generosity bank”

Starting what I’ve dubbed our “generosity bank” has been one of the most rewarding ideas our family has ever implemented. Going back to one of the very first things I said, it is hard to replicate the feeling you get when giving and having the complete assurance that you can afford to do it. Sure, random acts of kindness tend to be spontaneous. However, I also think that unpreparedness can often be the reason people don’t take advantage of these opportunities. Knowing that we wanted to find a place for these items within our family finances, my wife had this brilliant idea to establish a line item in our budget to effectively build up a sum of money earmarked for random acts of kindness. That way, when an opportunity comes along to randomly bless someone in need, we don’t have to think twice.

  1. Teach your children early about giving

There is a reason why the envelope system works so well for children and why the system for children is often as simple as “give,” “save, “spend.” It simplifies basic money management concepts and establishes a prioritization for saving and generosity. As children mature, so does their comprehension of money and certainly of generosity. But seeds can be planted very early and nurtured throughout the years. My children are nearing ages 3 and 1, so a little young to understand completely. But my wife and I have a pretty good idea what we will implement in our home. Below are what we have either started or plan to start at the appropriate time.

  • Start some sort of envelope system mentality as early as possible. Reiterate frequently the purpose and motivation behind a “giving” jar (or whatever you decide to use).
  • Let the kids decide what or who to give their money to. It creates ownership in the process and, frankly, you want them to feel pride in what they did.
  • Match what they give. This creates incentive and maximizes their impact. It also shows that you are proud of their efforts and support them in their decision.
  • Let them participate in random acts of kindness. Just trust me, it’s cool to watch!

At the end of the day, the concept of generosity can land on people very differently. Some are more inclined to give financially than others, and that is ok. However, for those that are motivated to give, proper planning can ensure you are able to support the causes and organizations that you care about and not sacrifice other financial priorities important to your family. If you are curious about the impact of building generosity into your family’s financial plan, or simply want a second opinion on the efficiency of the giving plan you are already executing, reach out to the YPFIT™ team here at Atlanta Financial. Our team of experts can certainly assist you in ensuring that your family’s financial legacy reflects your spirit of radical generosity.

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