December is usually the month when Americans give the most money to charity. For most of us, this charitable giving means simply writing out the same check for the same organization that we gave to last year and the year before. But advisers say that whether you’re giving to the same old charity, or contemplating somewhere new, it’s important to know about everything from the tax implications to the charity’s preference on payments to ensure that your dollars make the most impact.
Jon Bon Jovi’s new pay-what-you-can community restaurant, Soul Kitchen, could also end up taking in more cash than you might expect. In fact, when consumers are allowed to choose their own price, they often end up paying more, experts say.
Pay-what-you-can models work a lot better than classic economic theory suggests they should, says Ayelet Gneezy, an assistant professor of marketing at the UC San Diego Rady School of Management, who has studied the concept. “Almost all pay-what-you-want experiments that I’ve heard of, people pay even when they don’t have to, which is amazing,” Gneezy says. Traditional economic theory holds that people are “selfish, rational agents” who seek to maximize their own best interests — yet people tend not to take advantage of what to calculating eyes would look like an opportunity to get something for nothing. “That suggests people really care about fairness, they want to do the right thing,” she says.
When the money’s going to charity, as it is at the Soul Kitchen, people tend to pay more. Gneezy and colleagues ran an experiment at an amusement park where people could pay anything they wanted for a souvenir photo of themselves riding a roller-coaster. When they were told half of the money was going to charity, fewer people bought the photo, but they paid more than six times as much for it. Basically, when people know the money’s for charity, they don’t want to look like cheapskates, so they either skip it entirely or they give generously, Gneezy says.
Anything that disrupts that feel-good atmosphere, however, reduces the amount people feel like they want to pay. In another experiment, Gneezy found that people paid more at a pay-what-you-want restaurant when they put the money in a donation box than they did when the owner took the money directly. Putting the money in a box anonymously seems to feel more like a gift or a show of appreciation, whereas having someone observe the payment makes it feel more like a business transaction, she says. Suggested prices can also make an exchange feel more businesslike, making people less generous, she says.
It’s a crazy theory that goes against everything you might have heard, but Daniel Post-Senning, great-great grandson of the grand dame of etiquette Emily Post, says the nicer you are the more likely you are to make money and snag bargains.
Forget about rolling up your sleeves and jabbing other people with your elbows on Black Friday: his theory goes for shoppers, too. Post-Senning spoke to Pay Dirt about the 18th edition of “Emily Post’s Etiquette.” It’s been seven years since the last edition and a lot has changed.
Pay Dirt: You say successful business people and millionaires are often nice.
Daniel Post-Senning: Yes, people will want to work with you if you treat them with dignity, honesty and respect.
So what if I don’t like your new book?
I would advise you to look for the benevolent truth. For instance, if you don’t like your friend’s dress, say, “Only you could pull that dress off, Sarah.”
That doesn’t sound very benevolent to me.
That dress is atrocious. That would be the truth.
How else can minding our Ps and Qs save us money?
Americans are returning to pre-recession charitable giving habits, according to a new report. That’s not entirely a good thing.
Adjusted for inflation, charitable giving rose an estimated 2.1% last year to $290.89 billion, according to the Giving USA survey released today. That’s notable after the collective 13% drop in 2008 and 2009, yet means nonprofits have roughly six more years of recovery at similar rates to reach pre-recession levels. Donations from individuals increased 1.1%, which Giving USA says is consistent with other years immediately following recessions.
The charities consumers choose are also shifting back toward pre-recession habits, suggests Patrick Rooney, the executive director of The Center on Philanthropy at Indiana University, which co-produced the report. In a statement, he points to the 3.5% and 4.1% increases in giving to education and to arts, culture and humanities — as well as the 1.5% drop in donations to human services like homeless shelters and food banks.
The Central Community Chest of Japan, a major organization that co-ordinates charitable donations throughout the country and works with the Japanese Red Cross and other major charities there, says the distribution of funds on the ground is “not going smoothly.”
This will add to mounting concerns among those who made donations to the Japan relief effort in the wake of Japan’s 8.9-magnitude earthquake on March 11th. The Tokyo-based charity’s comments came before Thursday’s 7.4-magnitude aftershock off Japan’s northeastern coast.
Worryingly, this charity is better placed then most to cope: it’s an organization with a vast network and works with a coalition of Japanese non-profit organizations, the government and local businesses. It’s also part of the U.S.-based United Way worldwide network, which isn’t actively fund-raising for Japan but refers donors to the CCCJ.
Nearly one month after the earthquake and tsunami in Japan on March11th, there are alarming headlines about donations not reaching victims, confusion over the amount of money received by charities, worries about your donations reaching those who need it the most, and questions about why cash hasn’t yet been distributed directly to those on the ground.
Recent headlines like “Fail: Japan Red Cross Has Collected $1 Billion, But Failed To Give Any To Victims Yet” stem from comments by Japan’s Chief Cabinet Secretary Yukio Edano, who has urged that the process of channeling money be accelerated. It hasn’t happened yet. The Japanese Red Cross says it will start that “as soon as possible.”
Understandably, those who donated are frustrated. But, for those who donated from the U.S., it’s not as straightforward as it might appear. Firstly, international donations are used for a central fund for the relief efforts, not distributed in cash locally. Secondly, domestic Red Cross collections are pooled in a national committee that includes other major charities.
This is an unorthodox proposition. Sell your multi-million dollar Venice Beach house, which once belonged to Eric Clapton, donate anything above the market price to the relief efforts in Japan and get a highly lucrative tax break while you’re at it. Sounds too good to be true? Not if you live in California. If you are, you may qualify for a generous tax break. And a potentially hefty charity donation could be one way to qualify.
It was designed by the Japanese architect Arata Isozaki, his only private residence. Included in the house’s fixtures and fittings: a never-released solo recording by Clapton. Meadows, who volunteered in Sri Lanka after the 2004 tsunami, has pledged to donate anything he gets over the current market price of the Venice Beach house to the relief effort in Japan.
Amidst confusion over whether or not the Japanese Red Cross wanted your money following the March 11th earthquake and tsunami and whether or not a rich country like Japan actually needed your money, Americans have given generously, donating $120.5 million thus far to the American Red Cross fund for the recovery operation in Japan.
The American Red Cross says that the money will go to the Japan earthquake and Pacific tsunami response – specifically the Japanese Red Cross with 2 million registered volunteers there – and won’t be used for other purposes, despite claims by some critics that it would re-directed to other regions or get soaked up by administrative expenses.
“As part of the world’s largest humanitarian organization, the American Red Cross is eager to support our counterparts in the Japanese Red Cross, whose staff and volunteers are working tirelessly to meet the immense needs of their people,” according to David Meltzer, senior vice-president of international services with the American Red Cross.
It seems like an odd question with, perhaps, an obvious answer. Should you donate to the relief efforts in Japan, one of the wealthiest countries in the world, in the wake of the earthquake and tsunami? Answer: Yes, if you wish.
But some commentators disagree. A growing chorus of critics and websites is now saying Japan doesn’t need your money. Messages from charitable organizations have been unclear. And now well-meaning, compassionate consumers are understandably confused.
The Red Cross is a case in point.
Pay Dirt examines the millions of consumer decisions Americans make every day: What to buy, how much to pay, whether to rave or complain. Lead written by Quentin Fottrell, the blog examines these interactions, providing readers with news, insight and tips on shopping, spending, customer service, and companies that do right – and wrong – by their customers. Send items, questions and comments to email@example.com or tweet @SMPayDirt.