I am in favor of dropping the word "effectively" from donation discussions -- it's counterproductive. A $25 donation won't end world hunger, but that misses the point. If I had to pick a good fallacy for this reasoning it would be fallacy of division (or composition if you reverse reasoning): assuming that because individual donations are small, they don't matter collectively. It's the combined effort of many small donations that creates change. We should not wait for billionaires to be the our saviors. You should not wait and ponder how to donate effectively later in life.
Even with a small amount, it's worth considering (a) how much, (b) to what causes, and (c) to what geographic locations you want to donate.
I set my amount to ~3% of net income. This isn't random: if everybody in my country donated this percentage, it would amount to ~$40 billion yearly in aid based on my country's GDP. This demonstrates how collective individual action could significantly impact global charitable funding.
I prefer these causes, in order of importance:
- Healthcare
- Children
- Women's rights
- Education
- Universal basic income
Practically, selecting specific causes is challenging beyond charities' stated focus areas. Geographic targeting is even harder since most charities operate across multiple countries. Still, both are worth considering.
All in all, in my case I end up with the following portfolio:
| Cause | Percentage |
|---|---|
| Child healthcare services ( 1 fund) | 40% |
| Education for women (1 fund) | 40% |
| Universal basic income (2 funds) | 20% |
Similar to index fund investments, benefits will compound over years. Unlike index fund investments, you won't reap these benefits yourself.
Here some myths that I have to keep on debunking to people over and over again.
An international charity is not comparable a fund-raising lemonade stall. People think charities should run on prayers and volunteers, but that's not realistic. You need accountants, lawyers, IT people, fundraisers. A charity that's afraid to spend money on decent staff and systems usually ends up being pretty useless. Sometimes spending more on "overhead" means helping way more people in the long run. More: https://youtu.be/bfAzi6D5FpM
Poorly managed charities waste donor money and fail the communities they're meant to serve. When you're handling millions in donations and overseeing many employees, bad decisions can be devastating. Investing in experienced executives who know how to run these charities - even if their salaries seem high - usually means more of your donation actually reaches the people who need help.
No, but I might.