The Benefits of Giving
I’m one of those people who falls headfirst into the spirit of the holidays. I’m a sucker for the Christmas songs and movies, the chocolate oranges, and the family gatherings. The magic in the air is just something I can’t quite explain. So, with Thanksgiving just passing and Christmas on the horizon, being charitable and giving to others is on my mind.
Gift-giving is a big part of the holidays; so I thought it would be relevant to briefly touch on some of the benefits of spending money on others.
It’s difficult to write about the intangible benefits of certain finance topics, like spending money on others, because well, they’re invisible. It’s easy to see the benefit of contributing to a Roth IRA because you immediately see an increase in your account balance. Whereas focusing on where and how you spend your money is more nuanced and not always intuitive.
While a large part of personal finance is figuring out how you can effectively keep and grow your money, how you choose to spend your money will likely have the biggest impact on your happiness and life satisfaction.
Interestingly enough, the spending choice that has the biggest effect on a person’s happiness is how much money they spend on others. Study after study shows that the more you spend on other people, the happier you’ll be.
I realize that giving your money away seems counterproductive to the goal of building wealth. While this is technically true, there are plenty of money decisions that may negatively affect your net worth but will have a positive effect on your life.
“No one has ever become poor by giving.” - Anne Frank
A research study revealed that those who spent as little as $5 on someone else throughout the course of their day were happier at the end of the day than those who only spent money on themselves. This same phenomenon even occurred in very poor countries like India and Uganda where many people are struggling to meet their basic needs.
The same research also found that donating money to charity had a comparable effect to doubling household income on levels of happiness. And those who donate to charity feel wealthier even if they aren’t from an income point of view.
The list of benefits goes on and on. Spending on others has been proven to boost self-esteem, provide purpose, reduce stress, improve physical health, and even — I know this is what a lot of you have been waiting for — reduces your taxes.
Strong social relationships are critical for happiness and gift-giving has a surprisingly powerful impact on those relationships. Receiving a gift from a romantic partner has a significant impact on college students’ feelings about the likelihood that the relationship will continue over the long-term and lead to marriage. Spending money on a friend or romantic partner also strengthens that relationship and improves the mood of both parties.
Every year during the holiday season Walmart offers its Layaway program which allows shoppers who can’t afford to buy toys and other items upfront to use installment payments. Tyrone Ross has been encouraging people to find a local store and pay off others’ layaway balances and I recently took him up on his challenge. It wasn’t a ton of money and required very little effort on my part, but I had a profound experience that I don’t think I could have received by spending my money on anything else.
The act of choosing to give our money to others rather than spend it on ourselves helps loosen the attachment we often feel to our bank account and promotes a sense of gratitude for what we have. Giving to others is an effective way to establish a healthy relationship with money.
Take some time away from building your own wealth and see if you can benefit from giving to others in your life, especially to those in need. Obviously, this is easier said than done, but the research suggests it’s worth a try. I’m pretty sure I’ve never met anyone who wished they’d spent less on the people they care about.
Thanks for reading!