Giving to Charity Vs. Taking Advantage of Compound Interest

Putting the Personal in Personal Finance

I decided to write this after reading a piece about frugality and social giving. I've been pondering something related for a while now-giving to charity and getting compound interest. You see, I'm 22 years old. This gives me a tremendous edge with compounding. Starting investing now can make a big difference compared with investing later. Probably by hundreds of thousands of dollars, depending on how much later.

Let's just assume that we all know the benefits of compounding. If not, check out my article on inflation and savings, which shows some of the effects of compounding. Or this post by Get Rich Slowly has some good videos of Michael Fisher talking about it along with links to charts.

In my financial life, there are two big issues staring me in the face. One is the importance of starting compounding young because of the difference it makes. The other is Mr. Micah's student loans of over $100,000 (for getting a PhD).

So Mr. Micah are working on living frugally and putting most of the money towards paying off debt and the rest towards saving and investing.

The problem is that I'd really like to add a third party. I believe that it is right for me to give to others. Particularly organizations which relieve suffering. I see this as a religious issue as well as a part of being a decent human. Therefore, Mr. Micah and I try to give $30-50 per month to a couple places we think make a difference.

But I know that I could be giving more. Even if I didn't cut out of the debt payments, I could cut out some of the savings. What if I die, for instance, before I start really really giving? (I plan to do so by age 30, at which point we should have paid down a lot of the debt and started a decent savings going-so that I can put some money in it and focus elsewhere.) What if the world really really needed my money now?

I know that I want to leave some of it to worthy groups. But if I die young, there'll be nothing to leave.

Having been a campus social activist, I know lots of places where I could give. I know what I'd do if someone gave me a million dollars to give away. And I could give of my own, if I didn't think that compounding was worth so much in the long run.