In the wake of natural disasters and other tragedies, it’s easy to follow the hyperlinks from news stories to charities to payment screens.
But as Newtown, Conn., is learning three months after the shooting at Sandy Hook Elementary School, figuring out how to best use donated money is far more difficult.
More than $15 million has been donated to help the community cope with the aftermath of the disaster. So far, hardly any of that money has been spent. A recent New York Times piece offered a moving portrait of a town that, rather than uniting in its grief, has become divided over the question of how to spend the money that flowed in after the loss.
A newly established local foundation has been charged with disbursing the largest portion of the money, $10.2 million collected through the United Way of Western Connecticut. But the foundation faces a choice between drastically different visions for how the money should be spent.
Several of the families of those who died in the shooting have argued that the money ought to be given directly to them, claiming that this is the best way to honor donors’ wishes. Others in the town caution that at least some portion of the money should be reserved to address future needs, such as providing ongoing counseling to children who witnessed the shooting. Still others seek to use the money to establish a memorial for those who died.
Unfortunately, tragedy of the sort that struck Newtown is nothing new. Neither are questions of how to distribute aid in its wake. In the debate over how to spend the Newtown money, victims of other recent tragedies have weighed in, sparking a larger discussion of how to handle donations, particularly in cases, like Newtown, where the damage is emotional rather than material or economic.
One of the best parts of human nature is our capacity for empathy and our resulting willingness to make sacrifices for people we have never met and will never meet. The 2004 tsunami, 9/11, Hurricane Sandy, Columbine and Newtown, to name just a few, all aroused a deep sense of empathy, and all were followed by waves of individual donations.
Emotion is generally a poor basis for sound financial decision-making. In the rush to respond to distressing images on television by “donating now,” people may neglect to think about what their money can actually do to help, resulting in large pools of money without clear purpose. Meanwhile, ongoing issues such as hunger and homelessness rarely make it into the news. And, often, they go underfunded.
Charities, to either their credit or discredit depending on one’s viewpoint, often want to share the wealth. Broad-spectrum charities such as the United Way draw on high-profile headlines to bring donors to their sites. Once there, however, donors are encouraged to donate to general funds, rather than project-specific ones. The charities can hardly be blamed for this. They may not operate for a profit, but their missions still involve money, namely collecting and distributing as much of it as possible. If that means tapping into donors’ emotions, so be it.
The individuals whose public suffering and grief prompt donations, however, are often less inclined to see things this way. Seeking to stop charities from capitalizing on their losses, a group of family members of shooting victims, including some from Newtown, recently asked the federal government to create a new “National Compassion Fund.” Money given to the fund would be distributed directly to individuals, rather than being entrusted to nonprofits’ coffers, where it might be redirected to other causes.
I don’t think there is any such thing as bad generosity. If a “National Compassion Fund” is ever established, I will not begrudge those who contribute to it or those who benefit from it. The fund, at least, would help to ensure that individuals’ generosity does not end up fueling battles over funding in communities already divided by tragedy.
But while all giving may be good, thoughtful giving is best. In shooting tragedies, like Sandy Hook, there may not be much money can do. Meanwhile, in the wake of large-scale disasters like hurricanes, so much money is needed in such an organized effort that governments are better suited to take action than private, donor-supported charities. This is why charities eventually seek to shift the donations sent by well-intentioned supporters.
Of course, bottom-line-based giving can also be taken to an extreme. In December, a Brooklyn-based group, GiveWell, released a report ranking charities according to how far each donated dollar goes toward reducing suffering. According to the number-crunching, providing insecticide-treated bed nets in regions affected by malaria is the single most efficient use of money. Any given donor seeking to maximize his or her impact cannot do better than to invest in bed nets. But if everyone directed all of their giving exclusively to bed nets, a lot of soup kitchens, homeless shelters, and public radio stations would be forced to shut down.
Personally, I try to achieve a balance between emotion and effectiveness in planning my giving. I almost always make small donations to worthy causes when I receive personal appeals from people I know. But for larger gifts, I generally focus on supporting my local community and contributing to ongoing national and global efforts. At any given moment, a particular disaster or tragedy may be in the news, but hungry people always need feeding, children always need educating, and research to fight diseases always needs support. Since there is only so much money I am prepared to give away at any given time, supporting these things means learning to tune out other emotional appeals.
My thoughts may go out to those affected by the shooting in Newtown, but that does not mean my money must follow. There may be better uses for it.
Posted by Larry M. Elkin, CPA, CFP®
In the wake of natural disasters and other tragedies, it’s easy to follow the hyperlinks from news stories to charities to payment screens.
But as Newtown, Conn., is learning three months after the shooting at Sandy Hook Elementary School, figuring out how to best use donated money is far more difficult.
More than $15 million has been donated to help the community cope with the aftermath of the disaster. So far, hardly any of that money has been spent. A recent New York Times piece offered a moving portrait of a town that, rather than uniting in its grief, has become divided over the question of how to spend the money that flowed in after the loss.
A newly established local foundation has been charged with disbursing the largest portion of the money, $10.2 million collected through the United Way of Western Connecticut. But the foundation faces a choice between drastically different visions for how the money should be spent.
Several of the families of those who died in the shooting have argued that the money ought to be given directly to them, claiming that this is the best way to honor donors’ wishes. Others in the town caution that at least some portion of the money should be reserved to address future needs, such as providing ongoing counseling to children who witnessed the shooting. Still others seek to use the money to establish a memorial for those who died.
Unfortunately, tragedy of the sort that struck Newtown is nothing new. Neither are questions of how to distribute aid in its wake. In the debate over how to spend the Newtown money, victims of other recent tragedies have weighed in, sparking a larger discussion of how to handle donations, particularly in cases, like Newtown, where the damage is emotional rather than material or economic.
One of the best parts of human nature is our capacity for empathy and our resulting willingness to make sacrifices for people we have never met and will never meet. The 2004 tsunami, 9/11, Hurricane Sandy, Columbine and Newtown, to name just a few, all aroused a deep sense of empathy, and all were followed by waves of individual donations.
Emotion is generally a poor basis for sound financial decision-making. In the rush to respond to distressing images on television by “donating now,” people may neglect to think about what their money can actually do to help, resulting in large pools of money without clear purpose. Meanwhile, ongoing issues such as hunger and homelessness rarely make it into the news. And, often, they go underfunded.
Charities, to either their credit or discredit depending on one’s viewpoint, often want to share the wealth. Broad-spectrum charities such as the United Way draw on high-profile headlines to bring donors to their sites. Once there, however, donors are encouraged to donate to general funds, rather than project-specific ones. The charities can hardly be blamed for this. They may not operate for a profit, but their missions still involve money, namely collecting and distributing as much of it as possible. If that means tapping into donors’ emotions, so be it.
The individuals whose public suffering and grief prompt donations, however, are often less inclined to see things this way. Seeking to stop charities from capitalizing on their losses, a group of family members of shooting victims, including some from Newtown, recently asked the federal government to create a new “National Compassion Fund.” Money given to the fund would be distributed directly to individuals, rather than being entrusted to nonprofits’ coffers, where it might be redirected to other causes.
I don’t think there is any such thing as bad generosity. If a “National Compassion Fund” is ever established, I will not begrudge those who contribute to it or those who benefit from it. The fund, at least, would help to ensure that individuals’ generosity does not end up fueling battles over funding in communities already divided by tragedy.
But while all giving may be good, thoughtful giving is best. In shooting tragedies, like Sandy Hook, there may not be much money can do. Meanwhile, in the wake of large-scale disasters like hurricanes, so much money is needed in such an organized effort that governments are better suited to take action than private, donor-supported charities. This is why charities eventually seek to shift the donations sent by well-intentioned supporters.
Of course, bottom-line-based giving can also be taken to an extreme. In December, a Brooklyn-based group, GiveWell, released a report ranking charities according to how far each donated dollar goes toward reducing suffering. According to the number-crunching, providing insecticide-treated bed nets in regions affected by malaria is the single most efficient use of money. Any given donor seeking to maximize his or her impact cannot do better than to invest in bed nets. But if everyone directed all of their giving exclusively to bed nets, a lot of soup kitchens, homeless shelters, and public radio stations would be forced to shut down.
Personally, I try to achieve a balance between emotion and effectiveness in planning my giving. I almost always make small donations to worthy causes when I receive personal appeals from people I know. But for larger gifts, I generally focus on supporting my local community and contributing to ongoing national and global efforts. At any given moment, a particular disaster or tragedy may be in the news, but hungry people always need feeding, children always need educating, and research to fight diseases always needs support. Since there is only so much money I am prepared to give away at any given time, supporting these things means learning to tune out other emotional appeals.
My thoughts may go out to those affected by the shooting in Newtown, but that does not mean my money must follow. There may be better uses for it.
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