Canadians rank number two behind the United States in terms of philanthropic giving as a percentage of GDP. There are plenty of good reasons for donating to charity, and I am going to show you how you can make the biggest impact with your time and money.
By now you’ve probably heard of the group of billionaires who are pledging to give away half of their wealth to charity. Led by Bill Gates and Warren Buffet, this recent generosity of the super rich is unprecedented and has a chance to redefine philanthropy and make a real difference.
When You’re Young, Donate Time
When you are young there are a tremendous amount of financial pressures in your life. Most people start out paying off consumer debt, saving for a down payment on a house, contributing to their RRSP and TFSA accounts, paying down their mortgage, buying a new car, raising a family, and saving for their child’s education.
Adding significant charitable contributions to these enormous financial responsibilities could be next to impossible for a young person to manage, especially if they are in debt. By ensuring your own financial house is in order before donating to charity, you can set yourself up for more meaningful contributions later in life.
While most young individuals may be lighter in the wallet they can make up for it by donating their time and energy to worthwhile causes. Consider getting involved with your favourite charity by volunteering at an event, helping out on a fundraising committee, or joining their Board of Directors.
Living on a single income we can’t afford any significant monetary contributions to charity. A few years ago I joined a fundraising committee with the MS Society and led a team of co-workers, friends and family that raised close to $10,000 at the MS Walk. This effort certainly made much more of an impact than any donation I could have scraped together that year.
Fewer Charities, Bigger Impact
When you do decide to donate to charity, you won’t struggle to find a worthwhile cause to support. People are more likely to give to a charity in which they have a personal connection to, whether that is a love for animals or children, or a friend or relative suffering from a particular ailment.
Narrowing down your list of favourite charities is important because it will help you plan your gifts in a way that fits into your available budget. How many times are you asked for charitable support each year? There’s door-to-door canvassing, co-worker or employer fund raising events, children’s school activities, and various relief efforts around the globe. You can’t even shop for groceries without being asked for $2 to support the stores’ charity of the month.
All of these donations add up over the course of the year and, if you can’t say no, they can definitely impact your finances. I like to forecast my income and expenses for the year and plan for my charitable giving by setting aside money in the appropriate month where the fundraising will take place. And if you can’t say no, set aside some miscellaneous money each month to cover your spontaneous donations.
Making Your Impact Later In Life
Most people don’t make a significant philanthropic gift until after the age of 60. In fact, most major donations are likely bequeathed to an organization upon their death. This makes a lot of sense, considering that most, if not all, of your financial obligations are looked after, you may be in your highest income earning years, and you may have accumulated a fair bit of savings by this time.
Delaying your charitable contributions until later in life will also give you more time to choose an organization that is truly meaningful to you. And if your gift is significant you might even have the ability to direct your donation to something very specific in that organization, such as medical research, infrastructure, an endowment, or student awards.
Donating To Charity Is Important
Whether you decide to give your time and money now or in the future is your choice. Donating to charity is a personal and private matter, and most people give quietly without any hidden motivation. For now I am content to donate my time and energy while I’m young and still building our financial foundation, but I hope to have the means to contribute significantly in the future.
You can also donate things other than time and money, should that be a route that you wish to follow. One such way is by making a sponsored boat donation. When donating an old boat, all you have to do is contact the charity and let them know your intentions. The charity will then walk you through the entire process and will handle the sale of your boat themselves. The money for which the boat sells is then used by the charity to fund one of its causes. As an added bonus, you will receive a tax deduction once the sale has been completed.
Do you feel that it’s important to give whatever you can afford to charity?
As part of my recent resolution to simplify my life, I spent a week (yes, a week) cleaning out my clothes closet. It’s quite a sizable closet (I’m now realizing), but I couldn’t get into the back half due to all the (..ahem!) stuff on the floor. My poor husband’s clothes are relegated to the spare bedroom closet, otherwise he’d only have one outfit to wear.
On the weekend I hauled twelve bags and boxes to the Goodwill store containing not only clothing but shoes, purses, hair care appliances, blankets and lots of other miscellaneous stuff. I also tossed out quite a lot of worn and torn items and old bath and personal care products.
Why was I holding on to so much stuff?
I haven’t worked in an office for several years and I don’t really plan to have a “dress up” job again. I’ve also gained a pound or two recently but I don’t ever intend to wear my previous size 2 or 3 again. Even though I really liked my suits and other accessories they have no present or future value to me any more.
Then there were all the items that I probably could wear now but they didn’t look right or fit right, or pair up with anything, or were so old that I’d even out-retro the retro look! Some things I didn’t even recognize. Did someone break into my house and use my closet as a dumping spot?
People tend to hang on to clothing for a variety of reasons:
- It was expensive or was a gift
- It represents a special time in your life (wedding, first date)
- It will look perfect once you find something to go with it
- Yo-yo dieting requires several sizes to always be on hand
- You might have an occasion to wear it in the future (bridesmaid dress)
- Or, it’s just too overwhelming to go through everything
Go on a Fashion Fast
A lot of people care too much about what others think about what they wear. They tend to buy a lot of clothes and try to always be up to date in fashion styles. Do you remember what you wore last week? Unless your photo regularly appears in People magazine, I’m sure no one else remembers either.
I read an article about a woman who went on a self-imposed fashion fast, allowing herself to wear only six items for an entire month. The most shocking result of her four-week experiment was that no one noticed, not even her husband.
She got the idea from the website Six Items Or Less. An even stricter program called The Great American Apparel Diet has convinced participants to abstain from buying clothes for an entire year.
Even with my recent closet purge, I’m certainly not down to six items and I wouldn’t consider going to that extreme. I’m happy to know that the items I have are things that fit and that I like.
From now on I won’t buy something on impulse or just because it’s on sale. Being half price shouldn’t be a product’s best feature. I won’t buy anything unless I try it on first and it fits and feels comfortable. I’ll choose good quality over quantity and take care of my clothes so they will last, and toss anything that gets shabby or worn out.
What’s in your closet?
I know some people may think I’m weird, but I like to go to my closet occasionally (often, in fact) and admire how tidy and organized it is now. I can find what I want and I don’t have to fear an avalanche of sweaters falling on my head any more.
What’s the condition of your closet? Is it overstuffed? Do you wear 20% of the clothes you own, while 80% simply takes up space? Are you overwhelmed by what is lurking behind your closet doors? Could you choose six items that would hold you for an entire month? Could you go a year without buying anything new?
I’m just about ready to start working on all my other closets and chests of drawers. My husband better watch out or he’ll be down to his one outfit again.
Lately we have received a few emails from readers asking about monthly income funds from the Canadian big banks. A monthly income fund is a type of actively managed mutual fund that emphasizes current income, either on a monthly or quarterly basis, as opposed to capital appreciation.
These funds hold a variety of government, municipal and corporate bonds, preferred stock, and dividend stocks. Monthly income funds are designed for people seeking a reasonably consistent level of monthly distributions.
I researched the monthly income funds offered at each of the Canadian big banks and have put together this chart for comparison (updated December 6th, 2012).
Canadian Monthly Income Fund Comparison
| BMO | CIBC | RBC | TD | BNS | |
| Annual dividend per share | 72 cents | 72 cents | 51 cents | 37 cents | 36 cents |
| Yield | 9.98% | 5.7% | 3.9% | 2.12% | 3.63% |
| Expense ratio (MER) | 1.57% | 1.48% | 1.2% | 1.48% | 1.43% |
| % of stocks, bonds, cash | 52,45,3 | 53,42,5 | 43,48,9 | 59,36,5 | 49,40,11 |
| Min. initial investment | $500 | $500 | $500 | $100 | $500 |
| Min. subsequent investment | $50 | $25 | $25 | $100 | $50 |
| 5-year return | 2.58% | 0.97% | 3.76% | 3.42% | 2.68% |
| Net assets per share | $7.21 | $12.66 | $13.20 | $17.22 | $9.90 |
Which Monthly Income Fund Should You Choose?
Since the stock market crashed in 2008, monthly income distributions have been anything but steady, and with annual returns under 4 per cent you’re treading water at best after inflation.
Each of the big bank income funds, other than BMO, reduced their distributions at least once since 2007. TD slashed its annual distributions from 48 cents to less than 37 cents a share – a nearly 24 per cent reduction – while RBC cut its distributions from 57 cents to 51 cents per share – a 10.5 per cent decrease.
BMO’s monthly income fund has kept its distributions steady at 72 cents throughout the market turmoil and currently yields nearly 10 per cent, however investors should be wary because such a high yield isn’t sustainable for the long term.
The distributions could be cut, but even if they remain intact it’s likely that investors will just be getting their own capital back. Return of capital means the net asset value of the fund will erode over time and investors will need to track their adjusted cost base or face tax implications when they sell.
If you’re looking for total returns (not just monthly income) you might be better off choosing the RBC or TD monthly income funds.
I don’t like paying investment fees and prefer a do-it-yourself approach when it comes to investing. It wouldn’t be that much of a stretch to try and replicate this portfolio on your own.
By choosing some large-cap Canadian stocks in the financial, energy, and consumer staple sectors and then creating a bond ladder, you could produce your own income fund without the high MER.
What are your thoughts on buying a Canadian monthly income fund? Do you own one and, if not, which one would you buy today?