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  • Short Term Handling of Donation Money

    May 3rd, 2018
    ea, money
    Julia and I tend to make our donations at the end of the year, since that's when charity evaluations are typically most up to date. For example, over the last few years GiveWell has released their recommendations on 11/27, 11/28, 11/18, 12/1, 12/1, and 11/26. In general, donating in a smaller number of larger chunks makes it easier to put more thought into donations, which is especially important if you're uncertain. What should we do with the money in the mean time? Here are some ideas:
    • Put the money in an index fund until it's time to donate. We'd be taking on the risk of the investment out of our personal funds, since if it lost money between now and when we decided where to give to we'd have to make up from that out of personal funds. Similarly, if it gained money that would be more for us. Since (as I think people should generally be) we're more risk-averse with personal money than donations, it's somewhat better not to take this risk.

    • Donate to a donor advised fund now, which puts it in index funds. Make grants from the donor advised fund when we would have made donations. This would let the money grow, but now any risk/return is in the charitable bucket and not the self-spending bucket. The main downside would be that we'd be restricted to tax deductible donation opportunities. You also can't do things like run your donation via PayPal and a cash back credit card to get an extra ~3% (2% to you, 1% to the charity).

    • Keep the money as cash. This seems unlikely to be the best choice, but the main advantage of cash (or other very stable investments) is that maybe the value of donations is much higher right after a market crash, when most people are probably able to donate less. This probably depends on where you're donating to, what sort of runway they have, how likely such a crash is, how high inflation is, and how much of the total money available comes from sources that would dry up in a crash.

    • Don't do that. Instead, decide where to donate now and donate the money as it comes in. This would be especially good to do for organizations that need money sooner. If we're a large enough funder relative to their size that this is worth it for them, we could combine it with a commitment, like $10k/month for the next N months.

    One advantage of donating as you go, either directly or to a donor-advised fund, is that it's more resistant to drifting away from altruism, which seems to have a risk of ~10%/year. [1]

    Other options? Other considerations?

    (Why is this coming up now, and not in January? For the first few months of 2018 we were paying back a loan from pulling donations forward into 2017, and now we're starting to have enough built up it's time to think about what to do with it.)


    [1] I think the risk is a lot lower for us, though. We've made public commitments, are involved in the EA community (especially Julia, via full time work for CEA), are older, and have been doing this for almost a decade now, etc).

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