Can you be happier by giving money away?
Posted on January 31, 2020
Last week I wrote about four principles for spending on ourselves that makes us happy. The book Happy Money described a fifth principle, Investing in Others, that is obviously different. This post summarizes the main point of this part of the book: you increase your happiness more by spending on others than by spending on yourself. You’ll be happiest with this spending if you can conclude a) your giving is a choice you have made, not a moral obligation; b) you can connect in a concrete way to the people being helped; and c) you are confident that your gift has impact. Happy Money states your Prosocial spending should be greater than 1/10th of your personal spending.
This is a good, 11-minute TED talk by Michael Norton, one of the authors of the book. Here a 14-minute talk by Elizabeth Dunn, the second author: “Stop thinking about giving as a moral obligation. Start thinking of giving as a source of pleasure.”
== “Investing in others” ==
I like this term. I’ve written on this general topic before, “What’s Money For?” here and here. I used the term “help.” Help build success for your family and for others. But I like the term “Invest” better than the word “Help”.
== What’s Prosocial spending? ==
Prosocial spending is spending as gifts to others and donations to charities. You can use this table below to categorize your typical monthly or annual spending. Once you’ve categorized, divide your personal spending by your Prosocial spending.
In a representative sample of Americans, the average ratio of personal to Prosocial spending was 10 to 1. The study sorted out what made people happy. “The amount of money that individuals devoted to themselves was unrelated to their overall happiness. What did predict happiness? The amount of money they gave away. The more they invested in others, the happier they were.” This effect holds across a wide range of income around the world with people with very wide income ranges. Even experiments with toddlers show they expressed they were happiest when they gave their own treats to someone who had none and who expressed gratitude for their gift.
I’m sure Patti and I did not spend 1 in 10 on Prosocial gifts when we were in our Save and Invest phase of life, but now our Prosocial spending is more than 1 in 10. We don’t spend 90% of our annual Safe Spending Amount on ourselves (SSA; Chapter 2 Nest Egg Care). What we don’t spend on ourselves we give to family or charity.
== How to Give to get you the most Happiness ==
The book described three strategies organizations seeking donations can use to increase happiness of donors. We can apply these three to the way we give to give us more happiness. 1. Make It our Choice; 2. Make a Connection; 3) Make an Impact.
Make It our Choice. well, this is pretty obvious. We want to give because we make that decision and not because we think we have a moral obligation to do so or because someone tells us we should. Charities clearly need to ask for donations, but donors who read “It’s entirely your choice whether to give or not” felt happier and more connected to the charity than the message “I really think you should help out.”
Make a Connection. We are happier with our donations when we connect to those receiving our gifts.
All of us are connected to our family. Investing in our family to make them successful and happy is built into our DNA. Patti and I want to give in ways that are investments for the future: we emphasize gifts for education and to retirement plans. We want to give while are alive. I would not be nearly as happy with a plan to keep our money to ourselves to accumulate so that they can divide a bigger stack after we are dead.
We are happier – no matter how much we give – where connection to those we are helping is clear to us. Happy Money uses the example of Donorschoose.org. Donorschoose.org seeks donations to under-funded classrooms and does an excellent job of linking a donor to those the money will help. You can search for a classroom at your old school, one in your neighborhood, classrooms in the poorest school districts in the US, or make a donation based on your interest – science or history, for example. You get a thank you from the teacher and often from the students. That just reinforces the connection.
My friend Betty told me about two charities, somewhat similar to donorschoose.org where the connection between your giving and the end recipient is clear. Here’s one she likes: kiva. You get to pick the theme of your giving (women, education, refugees, others). You can even see a picture of the person you are helping.
Two of the large charities we give to do a good job in linking us to the people that ultimately will be helped. One we give to doesn’t do as good of a job in my mind in building an emotional connection, and after reading this, I need to “follow the money” to get a better connection to who is being helped and how. Or, more correctly I need to tell them how to better connect me to the people they help.
Make an Impact. Some charities are rigorous in assessing the impact of the donations they receive and organizations they then support. I buy into measurable, Big Impact for our donation dollars. Patti and I donate to GiveWell which rigorously evaluates how they direct donations to organizations that save and improve lives. I like to think that our donations will actually SAVE LIVES. I can connect with someone who WILL NOT DIE as a result of our gift.
100% of our giving at GiveWell goes to two top-ranked organizations that work to prevent malaria. About 400,000 die of malaria each year and two-thirds are under the age of five – every two minutes a child under the age of five dies from malaria. One organization distributes pills that prevent malaria in children under the age of five during the peak four months of the rainy season; the other organization distributes Insecticide Treated Nets. GiveWell estimates that roughly $2,500 saves one life.
Happy Money mentions several organizations that also rigorously evaluate impact that I had not heard about and now want to explore: Mulago Foundation (high impact organizations working to end poverty), Spread the Net (malaria prevention in Africa; 19 million nets protecting 41 million people), and Kickstart (water pumps for irrigation in Africa). I like the Kickstart video: “Poverty to Prosperity in Just One Season.” The other charity that my friend Betty likes is Charity: Water, investments in community owned water projects: 44,007 funded projects and +10 million with clean water. See a short video here.
Figuring out how best to give money is more difficult than deciding on our next nice vacation. I know Patti and I can improve and find the best organizations to support. I want to spend more time understanding the connection to the specific results of our giving.
How good of job have you done in picking the charities you give to? Are you getting the happiness that you should?
Conclusion: Giving our money away can make us happier than spending it on ourselves. But how we give makes a big difference in how happy that makes us feel. We make ourselves happier when we give in ways that emotionally connects us to the people we are helping and in ways that we know have a big impact on their lives.