We have been taught to give until it hurts. But in these times, such an advice seems …impractical. Yes, we should continue giving but in order to do that, we also have to protect our ability to give.
I remember the time when a woman managed to win a million pesos in the game show Deal Or No Deal. Then, everyone in the Philippines was astonished (or envious?) when she gave it all away as charity to an NGO. Until now, I still keep wondering: How did this woman find the selflessness to commit this act? And furthermore, was donating all of the money the best thing to do in her situation?
I don’t think I will ever find the answer to the first question (only God knows why). However, I can wrestle with the second. Clearly, the woman did a very noble act. Donating a million pesos is a big deal. But what if she had instead stuffed it in, say, a mutual fund, waited out for a few years, and when the harvest was ready, decided to give dividends to the organization in a recurring basis?
With this, the million pesos will still be stuck in the mutual fund earning more money, and getting bigger, over time. Sure, with this decision, what the woman can give each time would be paltry in comparison to giving a million pesos outright. But I am also pretty sure that, during the course of her life, she would have given more money if she pursued this course of action.
For example, instead of giving a million pesos in 2007, she could have given close to Php 1,600,000 in a 20-year period using the million pesos as an initial investment (This may be unrealistic. In that case, kindly let me know because I am an English major, not a Finance genius. My assumptions are that she invested it in a money market fund which guarantees 8% annual ROI in dividends. I also did not take into account that money in these funds grow exponentially. So there.).
Looking at some big foundations, I think they also use this model. They receive money. Then, they give out grants and everything, but the money they give out for charitable purposes are but a small part of their total assets. Why? It is because much of their assets are tied up in investment machines, earning more money as time goes by.
For some, this can be considered appalling (Why are they doing that? They are a charitable institution for crying out loud! They shouldn’t be greedy!) but this practice does make business sense. The foundation is simply trying to ensure the continuity of its operations and by not giving all, it does just this. They are simply protecting their ability to give.
Paradoxically speaking, it has to give less in order to give more.
As a final word, I don’t know what happened to the woman and I also don’t know what the NGO did with the million pesos. But I hope that they invested some amount rather than used it all to pay their expenses.
I remember the time when a woman managed to win a million pesos in the game show Deal Or No Deal. Then, everyone in the Philippines was astonished (or envious?) when she gave it all away as charity to an NGO. Until now, I still keep wondering: How did this woman find the selflessness to commit this act? And furthermore, was donating all of the money the best thing to do in her situation?
I don’t think I will ever find the answer to the first question (only God knows why). However, I can wrestle with the second. Clearly, the woman did a very noble act. Donating a million pesos is a big deal. But what if she had instead stuffed it in, say, a mutual fund, waited out for a few years, and when the harvest was ready, decided to give dividends to the organization in a recurring basis?
With this, the million pesos will still be stuck in the mutual fund earning more money, and getting bigger, over time. Sure, with this decision, what the woman can give each time would be paltry in comparison to giving a million pesos outright. But I am also pretty sure that, during the course of her life, she would have given more money if she pursued this course of action.
For example, instead of giving a million pesos in 2007, she could have given close to Php 1,600,000 in a 20-year period using the million pesos as an initial investment (This may be unrealistic. In that case, kindly let me know because I am an English major, not a Finance genius. My assumptions are that she invested it in a money market fund which guarantees 8% annual ROI in dividends. I also did not take into account that money in these funds grow exponentially. So there.).
Looking at some big foundations, I think they also use this model. They receive money. Then, they give out grants and everything, but the money they give out for charitable purposes are but a small part of their total assets. Why? It is because much of their assets are tied up in investment machines, earning more money as time goes by.
For some, this can be considered appalling (Why are they doing that? They are a charitable institution for crying out loud! They shouldn’t be greedy!) but this practice does make business sense. The foundation is simply trying to ensure the continuity of its operations and by not giving all, it does just this. They are simply protecting their ability to give.
Paradoxically speaking, it has to give less in order to give more.
As a final word, I don’t know what happened to the woman and I also don’t know what the NGO did with the million pesos. But I hope that they invested some amount rather than used it all to pay their expenses.
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