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Donating while in temporary debt (i.e. as a student)

9 Post author: ancientcampus 05 February 2013 10:50PM

Topic: I will be in debt for several years, but will eventually have a disposable income. Should I donate now or later?

Here's my situation: I am a student, with student loans and no income. I can take out more loans than I need. Grad PLUS loans have a fixed interest rate of 7.9% - higher than, say, a mortgage rate, or expected stock returns. Some day, I will have those loans paid off, and will have money that I intend to give to charity.

My objectives: to live on less than my means, and give a significant fraction of my income to charity.

Question: When, if ever, should I give to charity before paying off those loans?

My initial reaction is to keep a record of how much I feel like I should be giving now, then give it later, adjusted for interest (at some rate equal to or less than 7.9%) - this would result in a bigger donation, but the same impact on my finances.

The only times I think I should give now, and not later:
1)If I don't believe I will make good on my commitment later on. (I'll presumably have a family and bills, etc, and while I am perfectly happy to live on little myself, I know I will want my kids to have nice things. This is somewhat illogical, but I'm imperfect.)
2)If the most worthwhile charity I find see has a higher interest rate than 7.9%.
3)If I find an opportunity to use my money charitably in which I can do more good than others, or where no one else can or will donate. (Mainly, random acts of kindness to strangers or friends - or, someone is matching my donation)

I doubt I will ever see 2) happen (or if it does, I should raise awareness)
3) doesn't happen very often, but when it does I think it is an acceptable use of funds
1) is the main scenario that concerns me. I've heard that "giving charitably is a habit" (that's why my parents had me tithe as a kid). I think that's true, though I haven't read any research on that. Either way, though, as I have no meaningful income (and my loan "allowance" is way more than I care to borrow), how much should I donate to help form the habit?

What do you think? Also, are there any other reasons to donate sooner and not later?

Edit: Givewell has an article on giving now vs later. Not all of it is relevant to my situation, but one point:
>"Economic growth, increased giving, and smarter giving may mean that giving opportunities are worse in the far future."

Comments (36)

Comment author: Eliezer_Yudkowsky 05 February 2013 11:59:40PM 23 points [-]

Holden's analysis seems sensible. To it I would add only two points:

1) Ratchet up your giving each time you get a higher income - at the time the new money is coming in, and before you start thinking about how to spend it. After you get a raise, especially an unexpected raise, is the best time to donate - rather than waiting to think about it at the end of the year.

2) Holden's analysis implies that if you have no income, e.g. as a student, you should wait to donate until later. This strikes me as basically correct but it is really really surprisingly important to give something on a regular basis - and put cognitive effort into efficient altruism / optimal philanthropy / rational charity, to get into that habit as well, even for small amounts.

At the end of every year, for example, you might donate $100 - or even $10, if $100 is too much - after looking over the latest list of efficient charities and doing some thought about where the $100 ($10) will do the most good, for purchasing utilons rather than fuzzies, just as if you were about to give $10,000. If the end of the year is far enough away and you don't have a trustworthy reminder system already set up, you might do that part now, then again a year later or at the end of the year, etc.

If you don't do this part, I would evaluate a surprisingly low chance that you would remember to start giving, and giving efficiently, later in life when you have income.

Comment author: JoshuaFox 06 February 2013 06:13:13AM 2 points [-]

At the end of every year,

To get in a habit, you should donate more often, e.g., monthly, even if only a little.

Comment author: Matt_Simpson 06 February 2013 06:50:15PM 1 point [-]

I vaguely remember talk of having an iphone/android app that allowed you to quickly donate a little bit to SI/MIRI (/CFAR as well now) any time you had the urge to purchase fuzzies. This seems like a great way to get into the habit as well. Anyone know if it has it been implemented?

Comment author: lukeprog 06 February 2013 07:56:04PM 3 points [-]

We looked into the the thing that would let people donate to MIRI by sending a text message to a certain number, but it was prohibitively expensive.

Comment author: saturn 06 February 2013 11:50:17PM 1 point [-]

You might be able to get the habit-forming effect without "wasting" $100 or $10 by deciding how much you would like to donate in terms of your income and debt, then creating a worksheet for yourself which you dutifully fill out every month, even when you know it will come out to $0.

Comment author: jooyous 06 February 2013 06:05:56AM *  1 point [-]

I'm confused; can you explain why a student shouldn't ... prioritize fuzzies?

Whenever I think of purchasing utilons, I always figure I could get 10x later in life with each donation when I'm financially better off, so I walk away from the experience feeling like a utilon failure. So I worry that feeling of failure is going to make me less inclined to donate later. Meanwhile, if I stock up on fuzzies now, I can tell myself later that, not only am I not failing at utilons, but my utilons also feel 10x as fuzzy as those modest fuzzies from my student times.

Is there an obvious error in here? I guess I should also mention that I don't really spend a lot on ... stuff.

Comment author: Raemon 06 February 2013 10:26:52PM *  2 points [-]

The point is to get into the habit of giving efficiently. Going through the process of choosing which effective charity to give to is a distinct skill from choosing to give in the first place or acquiring the jobs that will give you more money later. So it's worth practicing. And it's worth conditioning yourself to take pride in that effective-charity-selection process.

I don't think most people actually "stock up" on fuzzies. Donating to fuzzy charities may simply build the habit of donating to fuzzy charities and then make you feel bad later when you have to switch. (One or both of us may be generalizing from one example here). You'll still want fuzzies when you're older (if you care about fuzzies at all), but you should, at all ages/incomes, practice acquiring fuzzies through the cheapest manner possible. (This probably varies from person to person)

There are good reasons not to donate a lot of money when you're a student or still searching for good jobs, but getting into the practice of thinking about charity rationally is still important.

Comment author: CarlShulman 06 February 2013 12:49:10AM *  16 points [-]

I think people tend to over-estimate rather than under-estimate the rate at which the goodness of expenditures decline in the future. Among other things:

  • Holden raises the possibility that giving opportunities will be worse in the future, but if you assign a 50% chance of giving opportunities being twice as good and a 50% chance of giving opportunities being half as good, then you should wait
  • 7.9% is a pretty reasonable rate of return
  • Debt can limit your options and flexibility for life decisions like further education, moving, and entrepreneurship
  • If you have a fast-growing process which will eventually saturate then earlier donations are not as much better as they might seem without considering saturation
  • Our technology is advancing, so we are getting closer to big decisions, opportunities, and problems involving those technologies, and spending on them will be easier when they are more in sight; there were cool opportunities for spending in the 1500s (funding science as it was just getting started, or sending colonists to the New World, who increased in numbers by something like a hundredfold since then), but many options were not even visible

However, independently of these issues it makes sense to give small amounts to "keep the habit" and stay in practice and aware of charity issues.

Comment author: juliawise 06 February 2013 09:28:02PM *  6 points [-]

An advantage to giving now, even if it's a small amount, is the example you set. Which is more likely to sway your friends: "I donate to (charity)" or "When my loans are paid off, I plan to donate to (charity)"?

Comment author: [deleted] 09 February 2013 07:55:26PM 2 points [-]

Hi ancientcampus, I'm in pretty much the same boat as you: same situation, same objectives. I'm not sure if you've heard of it, but I found the advice at www.givingwhatwecan.org really helpful. They have recommendations of the best charities, a supportive community, and advice for students.

What they suggest - and what I'm doing - is to not donate a substantial amount right now, but instead to wait until you're earning. However to get into/keep the habit of donating, a donation of 1% of your spending money is suggested.

As to whether you should wait to donate until after you have paid off your student loans, that would depend on what country you live in.

Comment author: ancientcampus 21 February 2013 12:18:56AM 0 points [-]

Thanks for the link!

Comment author: ygert 06 February 2013 07:28:58AM 2 points [-]

A point to take into consideration: If you have an income, the government will give you money if you donate to a nonprofit, in the form of tax breaks on the donated money. That gives you that bit more money to give. This is a important factor to take into consideration, as the amount of money the government gives you is not insignificant, it is the amount of tax you would have paid on that money, which can add up to a quarter or more of the amount.

Comment author: Qiaochu_Yuan 05 February 2013 11:10:49PM 2 points [-]

2)If the most worthwhile charity I find see has a higher interest rate than 7.9%.

What do you mean by the interest rate of a charity here?

Comment author: CarlShulman 06 February 2013 12:40:49AM 4 points [-]

Something like "will $100 given today do more good than $107.90 given 1 year from now?"

Comment author: Qiaochu_Yuan 06 February 2013 12:53:57AM 4 points [-]

If that's the case, it seems plausible to me that MIRI and CFAR both have interest rates higher than 7.9%, possibly substantially higher. On the other hand, for an individual, the value of having money now as opposed to later is larger than what interest rates would suggest: having more money now makes it easier for you to quit jobs, move places, obtain training, and generally do things that could substantially affect your earning potential.

Comment author: CarlShulman 07 February 2013 01:03:51AM 2 points [-]

If you were alive in 1900 do you think that the best charitable opportunities available to you would have been over 5,000x as valuable as the best ones available today?

Do you think that in 2063 effort spent on the best options then available, will be less than 3% as effective as spending today? Do you think that spending in 2100 will be less effective by a factor of ~746?

Comment author: Alexei 07 February 2013 05:16:39AM 2 points [-]

Like with most predictions, doing the numbers so far out isn't very accurate. I think a high growth rate for young organizations is reasonable, but certainly not sustainable for something like 50 years. It could be that donating now is the winning option, until your organizations of choice slow their growth down.

Comment author: CarlShulman 07 February 2013 06:45:28AM 1 point [-]

The point is: why believe this decade is much better than the 1930s or the 1980s, as well as future decades? You would have found something to do in those decades, what would it have been? And how good would it have been?

Comment author: Alexei 14 February 2013 08:17:21AM 1 point [-]

Oh, I see. I'm saying "Look, there is a 30% investment right now" and you are saying "Well, if it's true, then it seems like you'll be able to find other 30% investments in the future. Unless you have some evidence that this opportunity is different."

Good point. My evidence for this decade being special is that we only need to build FAI movement once, and the future is by a large extent determined by how the AI researchers react to the challenge. I'll have to think about this point more, though.

Comment author: CarlShulman 15 February 2013 01:06:46AM *  0 points [-]

"Look, there is a 30% investment right now"

But not one for which you can recapture the proceeds in cash. So a return-on-investment frame can mislead: if your spending compounds at some rate n times, and no more, and you don't get the money back, then over longer time frames it falls further and further behind things that can be reinvested and compound for longer.

Comment author: CarlShulman 22 February 2013 06:08:49AM 0 points [-]

Paul's post explains several of these issues pretty nicely.

Comment author: Qiaochu_Yuan 07 February 2013 04:03:34AM *  2 points [-]

So you're not talking about the interest rate of a particular charity over time but the interest rate of "the best charity at the time" over time, right? That's a good point but doesn't directly contradict my point.

Comment author: Dorikka 06 February 2013 04:25:18AM 3 points [-]
Comment author: MileyCyrus 06 February 2013 06:22:22AM 0 points [-]

Any ideas why this is blocked by Trend Micro?

Comment author: Michaelos 06 February 2013 04:21:33PM 1 point [-]

Depending on your area and schedule, you could try giving time and not money.

As a positive note of this: Some organizations really need volunteers and have easy to meet criteria for work that is not that hard. For instance, my wife started volunteering for a Feline Rescue Association in Baltimore, so on Monday and Thursday Mornings, she drives to the area, cleans up after cats, changes their food/water, gives people adoption papers and references the organization's website, etc.

As a more negative note of this: There are also organizations where they allow volunteers but the labor is substantially heavier, or they actually have a longer application process for Volunteers which may turn people off from volunteering. Also, a lot of the time volunteer places may not have your focus of charity. If you really want to give to Anti-Malaria Charities, there may not be an easy way to do that with time alone.

But it might be something to look into, if you have an urge to do good and very little cash. These kinds of opportunities are going to vary significantly by location.

Comment author: RobertLumley 06 February 2013 12:18:41AM 1 point [-]

This isn't really specific to the special case of having negative money. If you have $10,000 to give and can invest that in the stock market and earn money at a rate higher than your discount rate for lives, then you should invest the money in the stock market and give to charity in a years time. if this continues to be the case, you should continue to compound your money and will it all to charity when you die.

Now if someone can just give me a good way of figuring out what my discount rate for lives is, this would be helpful in answering this question for myself.

Comment author: army1987 09 February 2013 02:16:39PM 0 points [-]

I'll presumably have a family and bills, etc, and while I am perfectly happy to live on little myself, I know I will want my kids to have nice things. This is somewhat illogical, but I'm imperfect.

What's illogical with that? (I'm asking because that's exactly my position too, but I can't see anything wrong with that.)

Comment author: peter_hurford 10 February 2013 08:39:28AM *  1 point [-]

If you have utilitarian values, you shouldn't value your kids any more than you would value anybody else. Therefore, you shouldn't spend all your money on your children and probably shouldn't have children altogether.

Of course, if you don't have utilitarian values, then it wouldn't be illogical (assuming either moral realism is false assuming or assuming moral realism is true but doesn't forbid you from giving major preferential treatment to your children; the first of which seems a very reasonable assumption).

Comment author: army1987 10 February 2013 10:36:48AM *  1 point [-]

(The footnote isn't called anywhere and I assume there's a mis-formatted link in it.)

If you have utilitarian values, you shouldn't value your kids any more than you would value anybody else. Therefore, you shouldn't spend all your money on your children and probably shouldn't have children altogether.

But if people-sufficiently-similar-to-me-to-decide-the-same-way did that, they would eventually go extinct (unless immortality is achieved very soon), which wouldn't be a good thing (and might be already happening). (And this is before taking crazier decision-theoretical shit into account, which I'm still not sure how seriously I should take.¹)


  1. You know, I noticed that rule consequentialism plus Darwinism could be taken to mean that I should have children long before I even knew rule consequentialism had a name (I thought of it as a steel-manning of the Golden Rule -- not that I knew the word “steel-manning” either).
Comment author: peter_hurford 10 February 2013 05:51:32PM 1 point [-]

But if people-sufficiently-similar-to-me-to-decide-the-same-way did that, they would eventually go extinct

Only if they were really stupid. Following utilitarian values shouldn't, all else being equal, lead to terrible consequences.

Making sure your kids have lots of neat stuff, as opposed to a merely good life, wouldn't lead to extinction. And never having kids wouldn't be a strategy you follow dogmatically -- if too many people started doing it, it would no longer be a good idea.

~

(The footnote isn't called anywhere and I assume there's a mis-formatted link in it.)

Deleted. I had integrated the footnote into the text, but forgot to delete the remainder of the footnote.

Comment author: army1987 11 February 2013 05:31:58PM *  1 point [-]

Only if they were really stupid. Following utilitarian values shouldn't, all else being equal, lead to terrible consequences.

(I was mostly thinking about the “and probably shouldn't have children altogether” part rather than the “you shouldn't spend all your money on your children” part.)

Making sure your kids have lots of neat stuff, as opposed to a merely good life,

In principle, I agree (and if/when I have children, I'm probably going to try to teach them to be as frugal as me), but there's this issue that makes it hard to have children live a good life without having lots of neat stuff. (OTOH, I know someone whose parents made a point of not buying him expensive stuff just for signalling to his peers, and he doesn't seem to be terribly maladjusted now that he's in his twenties compared to other people in his demographics.)

Comment author: peter_hurford 11 February 2013 06:14:16PM *  1 point [-]

Only if they were really stupid. Following utilitarian values shouldn't, all else being equal, lead to terrible consequences.

(I was mostly thinking about the “and probably shouldn't have children altogether” part rather than the “you shouldn't spend all your money on your children” part.)

As I said, "never having kids wouldn't be a strategy you follow dogmatically -- if too many people started doing it, it would no longer be a good idea."

Right now, I think money is better spent with first-order regard to utilitarian values on causes other than children. But I could see strong second-order reasons for children (keeping oneself motivated, some situations where the child could be a good successor, etc.). You could also not want to be utilitarian on this particular issue.

Comment author: Larks 05 February 2013 11:02:46PM 0 points [-]

Long run (as in, 100 years on NYE) returns on the stock market are more like 9-10% if you re-invest dividends.

You might want to wait till you have a taxable income to claim deductions on.

Despite these two considerations, I agree with donating subtantially at present (and do so myself).

Comment author: CarlShulman 06 February 2013 12:35:36AM 11 points [-]

Survivorship bias: US stock markets did much better than the world average, with many markets stagnant or outright expropriated.

Comment author: Larks 06 February 2013 09:51:38AM 2 points [-]

Do we know how to control for that, quantitatively?

Comment author: gwern 06 February 2013 04:20:15PM *  6 points [-]

Use much larger international samples, including data from markets that shut down or had long interruptions. Doing this brings the return down several percent from the USA estimates; for example, Jorion 2003.

(It stands to reason that to maximally avoid survivorship bias and diversify, you would want to invest equally in every country, at which point your portfolio would grow something like the growth rate of the global economy which is ~2% annually over the last century or two IIRC; ironically, this apparently has happened to the Norwegian sovereign wealth fund - it's too big to invest significantly in any particular market, so they are ultra-diversified and have what looks like low annual returns.)