Charitable Giving Explodes During the Pandemic
Last March, I was forced to relocate the world headquarters of the financial newsletter I publish to the library on the first floor of my home. It was an exciting — and scary — time. In the beginning of the pandemic, we thought that millions of people would die from the virus in the U.S., resulting in an economic depression that would last for years. I was prepared for the worst. But I had enough savings to last us a decade, and enough food in the house to last for months.
And then something interesting happened — my business exploded. I had my best month ever in April 2020.
I was acutely aware that my financial fortunes were being mirrored in real-time by other people’s misfortune. I could work — I had a virtual business that I could do from my home. Most people could not. And thus began what one financial analyst, Peter Atwater, called the K-shaped recovery — some people, usually affluent professionals, actually benefited from the pandemic, while others were harmed grievously by it.
In the past, I had given rather sparingly to charity. A few thousand dollars a year to cat rescue organizations and some of the educational institutions I attended. Flush with cash, I decided to increase my giving by factor of ten, and I wondered if other people were doing the same.
It turns out they were. I interviewed dozens of people for this article, to see how charitable giving changed during the pandemic — whether it increased or decreased, where the money went, and what people’s feelings about it were. Out of everyone I interviewed, people had increased their charitable giving dramatically, except for two cases: one person whose family was hit hard economically by the pandemic, and one person who moved from a low-tax regime (Atlanta) to a high-tax regime (New York), and the high taxes had crowded out charitable giving. I heard story after story about how people, being blessed with riches as a result of the pandemic, were moved to help the less fortunate.
I should point out that almost nobody consented to having their name appearing in print associated with their charitable giving. Charity is a private matter, and people were concerned about the appearance of bragging about giving so much — or appearing miserly for giving too little. Out of deference to my sources, all of their identities have been concealed or changed.
Fidelity Charitable, the philanthropic arm of Fidelity Investments, provided some data on giving during the pandemic. They found that most donors planned to maintain or increase the amount they donate to charity during the pandemic. As it turns out, younger generations are more generous, with 46 percent of Millennials giving more, compared to 14 percent of Baby Boomers and 25 percent of Generation X.
My sample turned out to be significantly more generous, perhaps because it was comprised mostly of current and former finance workers, who benefited disproportionately from the downturn and recovery in the financial markets. Nearly all said that they were increasing giving by a consequential amount, with some approaching or exceeding 15% of their income, whereas the average American family donates 3–5% of its income. But it’s not so much the absolute level of giving that was noteworthy — it was the composition.
A common theme I heard throughout my discussions with people is that they are very suspicious of large, nationwide charitable organizations, and prefer to donate locally, where it has the most impact, to places like food banks and homeless shelters. One disabled veteran, who is currently a finance worker, claimed to have been involved in many veteran charities over the years. “Money is important,” he said, “but depending on which charity you’re working with, administrative costs can easily eat away at 70 cents on the dollar.” This is a not-so-veiled reference to the Wounded Warrior Project, which is known for having a bloated bureaucracy. He prefers to give his “time and expertise.”
I tend to avoid large charities as well, but I was once in Nashville and struck up a conversation with an ASPCA representative on the street, talking about my rescue cats, and signed up to give a $20 monthly donation on the spot. I’m acutely aware of ASPCA’s marketing expenses and I got the feeling that this was not such a good idea, but I signed up nonetheless and will probably continue to give until my credit card expires.
This theme, of avoiding large charities, was echoed by many others. An investment banker from London said that he never gives to big charity organizations because he doesn’t “trust” them and that there is no transparency as to how they spend the money. He prefers to give to specific cases of people in dire financial need through crowdfunding platforms. I’ve been a bit dismissive of GoFundMe and other crowdfunding platforms, but as the donor, at least you know that the money is going to the recipient without a great deal of overhead expenses, though it should be pointed out that GoFundMe is a for-profit company.
Regardless of much people claimed to be giving to charity, they also claimed to be tipping much more generously at restaurants and bars. An insurance executive from New York said that what vastly changed was “how much we tipped bartenders, waiters, grocery baggers, and valets” saying that it was a “conscious effort to support local service workers.” Personally, I have always tipped generously in restaurants, averaging about 30–40%, along the additional $10 or $20 bill in the tip jar at Dunkin’ Donuts or Chipotle, and I’ve increased it slightly since the pandemic started.
A securities trader at a New York investment bank hadn’t given much additional to charity, but said that the real difference is how he tips, which is “way, way more.” He said that “Between ordering out and haircuts and anything else tippable, we have ramped that to a level that is about 30% or so.” An account manager in Southern California said that he gave $50 for a $20 haircut recently, instances of giving which I found to be surprisingly common.
One area in which charitable giving seems to be declining is anything that smacks of politics. Two people claimed to be giving less to their church because of political stances that were taken by the church leadership. Likewise for alma maters, where sources alleged that the universities that they attended were engaging in virtue signaling behavior. One individual said that what was “clear” was that making a donation to his school was “akin to making a political donation,” which is why one consultant from Houston said that if he doesn’t agree with whatever public stance a charity has decided to take on certain issues, then he has to “decide if he’s willing to overlook that because he values their ‘core purpose.’” This sentiment was echoed throughout my conversations with sources, as people were reluctant to give to any organization engaged in activities that they found distasteful, no matter how worthy the cause. As a non-profit, it’s an argument for remaining politically neutral.
And then, there is the issue of the huge amounts of government transfers that people have received during the pandemic: the three stimulus payments, and enhanced unemployment benefits of first $600/week, then $300/week. One hedge fund manager from California said that he’s given more during the pandemic, typically focusing on underprivileged education and food donations, though he said that with the government handing out so much largesse, he will be giving less in the future. “People getting paid not to work means every man for himself.”
