Building wealth and giving on your terms

Read time: 5 minutes

Key takeaways

• Charitable giving can be part of your wealth-building plan without taking priority over your other financial goals.
• Employer matching programs can increase the impact of gifts you already plan to make.
• Appreciated investments and donor-advised funds (DAFs) can offer flexible ways to give as your assets grow.
• Your giving strategy should reflect your values, cash flow and broader financial plan, not someone else’s definition of generosity.

If charitable giving matters to you, it can have a place in your financial life while you’re still building wealth.

Whether you’re saving for retirement, paying down debt or working toward other goals, the key is to not treat charitable giving as a separate financial goal or an all or nothing decision. Instead, consider how you can give to causes that matter to you in a way that makes sense with your circumstances. For example, you might set a recurring amount, give at certain times of year or increase your giving when your income or cash flow allows.

The right approach can allow you to give meaningfully while making progress on the goals you’re pursuing.

Maximize your employer’s charitable match

Before revisiting your charitable giving budget, see if your employer offers a charitable matching program.

A match can increase the amount an organization receives without increasing your contribution. A $500 gift, for example, could become $1,000 for a qualifying organization if your employer matches it dollar for dollar. Every program is different, so review your employer’s eligible organizations, matching limits and deadlines before donating.

The goal isn’t necessarily to give more. It’s to understand whether the resources you’ve already set aside for charitable giving can have a greater impact.

Consider giving appreciated investments

If you have investments that have increased in value, donating some  of them directly may be another option to explore.

When you donate an eligible appreciated investment as is, rather than selling it and donating the cash, you generally won’t owe capital gains tax on the investment’s increase in value. You may also be able to claim a charitable deduction based on the investment’s fair market value, depending on the applicable rules and limitations. The right approach depends on factors such as your cost basis, holding period, overall portfolio and tax situation.

This can allow you to support a cause you care about while potentially reducing the tax impact of selling the investment. Before donating, consider speaking with a tax professional or advisor to better understand what it could mean for your specific circumstances.   

Use a donor-advised fund to create a giving rhythm

If you’re still building wealth, a donor-advised fund (DAF) can provide another way to make charitable giving a consistent part of your financial life.

While a DAF’s features and costs vary by sponsoring organization, it generally allows you to set aside cash or eligible assets for the sponsoring organization to distribute based on your recommendations. Contributions to a DAF are irrevocable, and the sponsoring organization has legal control over the contributed assets. You may also receive applicable tax benefits when you contribute to the fund.

You can decide to contribute to the DAF at one point in the year, then recommend grants to organizations over time. This flexibility might make it easier to set aside money for charitable giving while supporting organizations on an ongoing basis.

Let your values—not obligation—drive the strategy

Focusing solely on giving as much as possible can make it harder to balance charitable giving with the other priorities in your financial life.

Instead of committing to a certain monetary amount, build a strategy that aligns with your values and financial circumstances. You might prioritize a few organizations you already support, give more during certain times of year or decide as a household which causes are most important to you.

Your approach can also change as your finances do. A new job, bonus, equity event or other increase in cash flow may create an opportunity to increase giving. A major expense or competing financial goal could mean maintaining or temporarily reducing your contributions. Review your charitable giving strategy regularly to see where adjustments make sense, and to help maximize potential tax benefits over time. You might also compare your approach with leaving gifts to charity through your estate plan, which generally won’t provide income tax benefits but may offer estate tax benefits.

The goal is to create a giving approach that remains meaningful to you while leaving room for the rest of your financial priorities, and these are just some of the strategies and issues to consider. Your advisor can help you assess your options as they fit into your broader financial plan. They can also coordinate with your accountant and estate planning attorney to help you make the most of your giving and maximize the impact of your charitable contributions in support of your philanthropic goals.

This material is provided for informational and educational purposes only. It does not consider any individual or personal financial, legal, or tax circumstances. As such, the information contained herein is not intended and should not be construed as individualized advice or recommendation of any kind. Where specific advice is necessary or appropriate, individuals should contact their professional tax, legal, and investment advisors or other professionals regarding their circumstances and needs.

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