“When people give to charity, they should not be thinking necessarily about what they personally care about, but where their money can go the furthest.”

How much money should you give to charity? How can you ensure your donation is having the biggest impact possible? What are the key motivating factors behind why people donate to charity?

Wharton Marketing and Psychology Prof. Deborah Small is attempting to answer these big questions. She spoke to Wharton Business Daily host Dan Loney about her research regarding charitable giving and the impact of Giving Tuesday.

Interview Highlights

Why People Decide to Give to Charity

“Oftentimes people start giving when they feel some strong connection to a cause. Maybe it’s a loved one in their family who suffers from a disease, they experience a natural disaster, or even sometimes something more distant, like they hear a story on the news that tugs at their heartstrings and that engages them with a particular cause and causes them to start giving.”

The Paradox of Talking about Donating

“In our society, we care about people being moral. If you donate, you’re the most generous person in the world. If you do it all anonymously, you don’t get any credit for it. And so, people are motivated to publicize their good deeds. But, there’s an interesting paradox here, which is that when you publicize your good deeds, if you announce it to your friends, or if you post on Facebook about all the ways in which you’re generous that looks insincere. It looks kind of phony. There’s an interesting paradox here where people care about getting the word out, but they also don’t want to be boastful about their charity because that suggests that their motives are insincere.”

Things to Consider Before Donating to Charity

“More recently there’s a movement known as the Effective Altruism Movement, inspired by the philosopher Peter Singer, who argues that when people give to charity, they should not be thinking necessarily about what they personally care about, but where their money can go the furthest. It’s an idea that makes sense to people in economics and in finance who are used to thinking about investing as, ‘How can my investment get the greatest return?’ The idea and the effect of the altruism movement is to apply that same logic to charitable giving.”

“I think also the transparency of the organization is really critical and I think that goes hand in hand with impact. Donors should really just do their research and try to find out how transparent the organization is and to make sure that they are actually doing good, not just feeling good and providing a drop in the bucket.”

Giving Tuesday

“The creation of Giving Tuesday was really smart because the holiday season is all about giving. But, usually, we think about holiday giving in terms of giving gifts to people who we love and who are part of our immediate community. We have Black Friday, we have a Small Business Saturday, and we have Cyber Monday all with the aim of purchasing gifts for people we’re close to, so the idea of Giving Tuesday was really to extend that to giving to causes people care about.”

Donating Around the Holidays

“It’s kind of convenient that the end of the year is approaching, which for tax reasons, means that people who plan to give to charity are kind of reminded if they haven’t done it yet and they’re motivated to give in order to get their tax breaks. And so even prior to giving, we saw what’s known as the ‘end of year giving bump’ that a lot of people make their charitable donations towards the end of the year.”

— Emily O’Donnell

Posted: December 3, 2019

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