By Brandon Miller, CFP–
Science can tell you why Santa is so jolly. It has nothing to do with getting to travel the world or only having to work one night a year. Being able to eat all the cookies he wants because no one judges him for being hefty isn’t a contributing factor either. What makes Santa, Kris Kringle, Father Christmas, St. Nicholas or whatever you want to call him so cheery is that he’s mastered this whole giving-is-better-than-receiving thing.
Yes, there really is scientific evidence that you’re happier giving your money to others than spending it on yourself. Numerous studies over the past decades demonstrate a “giver’s glow” or “helper’s high” that stems from being generous. This holds true across the globe, regardless of income level or gender.
But enough about Santa and science. Let’s talk about you.
Scratch that. Let’s talk about whom you want to help. I always suggest that my clients focus directly on whom they’ll be giving to because it provides clearer guidance for their thinking. You’ll also, of course, have to decide how much can you afford to give and when you should bestow your gifts.
Let’s tackle the first question first. The only real way to know how much you can afford to give is to know where your finances stand. What are your sources of income today and in the future? How much have you put away? How much do you need each month, both now and years from now? How many years do you think your money will have to last?
Then, look at what you have, or will have, minus what you need for the rest of your own life. You can spend whatever is left as you wish on whatever you like. If that means doling out some excess wealth to someone else, then the question becomes, should you give your gift now or later? This subject isn’t quite as straightforward, because there is a lot of emotion wrapped up in it. But the following are some things that I suggest my clients should consider.
Your gift is likely to be more impactful now versus later. Yes, it’s dramatic to give a big inheritance to someone once you’re gone. But really, where’s the fun in that (unless it’s a plot twist in a movie)?
Giving money to your loved ones or charities now means you get to see the impact that it has on their life or organization. This is where it really helps to focus on your specific recipient. For example, if you’re thinking of leaving a grandchild $50,000 in your will, wouldn’t that money be more meaningful if it were doled out in $12,500 increments over four years to help defray tuition costs? Or if you’re leaving part of your estate to a charity, will they even be around decades from now when you’re gone?
Another reason to choose the here and now is to use your gift as a trial run. If you hand $5,000 to a friend who’s having trouble making rent and they blow it on a pair of Jimmy Choos, do you really want to leave them a larger chunk of change later?
Then there’s the reason for choosing now that’s near and dear to me. I’m a huge proponent of giving your values along with your money. Here are two strategies that I use with my own sons:
1. I match the money that they put toward a goal. For every $1 they save, I contribute $5. Technically I’m giving my sons money, but I’m teaching them about saving at the same time.
2. My second tactic is to insist that they give back part of what I give them. I might hand each twin two $5 bills with the caveat that they can spend $5 on themselves, but the other bill has to be spent on someone else. This is a really fun way to teach them how good it feels to give to others.
These tactics work equally well for adults.
However you choose to share your money with others, you’ll feel a rush of dopamine and endorphins that stem from the act of generosity itself, and you don’t even have to put on a Santa suit.
Brandon Miller, CFP® is a financial consultant at Brio Financial Group in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals.
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