Imagine you’re at a gas station and some mangy guy comes up asking for money. What do you do?

If you give him a few bucks, he might buy food and eat for a day. Or he could buy cigarettes, malt liquor, drugs, etc. You have no way of knowing.

Personally, I have never given money to a panhandler. Even if the guy has honorable intentions, giving him a few bucks is not going to help. In fact, it’s going to make things worse. Because it delivers a small dose of positive reinforcement—he asks for money, he gets money, so he keeps asking for money, and his lot never improves.

Receiving a small income stream from panhandling removes a powerful incentive to do something different—like getting substantive help with a mental illness and/or drug problem, getting cleaned up, and getting a job.

If you want to help people, there are a million better ways to do it. For example, you could give money and/or time to some sort of outreach organization that actually helps people turn things around.

Get It in Writing

I get hit up for money often. Maybe a friend is running a race to raise money for children’s cancer research or something like that. So, I throw in $50 and save the receipt for my taxes.

I have also donated large sums of money twice in my life—once to set up a scholarship at my high school and once to a cat shelter.

The gift to the high school was formal. The school has a fundraising department, and we signed a contract spelling out how much I will give over time and what the school can do with the money.

Drawing up a contract like that is a good idea when you’re giving a hefty chunk of change. You are going to be pretty upset if you donate $100K, and the organization doesn’t use the money the way you wanted.

My second large donation was to a cat shelter. If you follow my work, you know I have six cats. And protecting cats is important to me. Anyway, the cat shelter needed a new roof. So, I hosted a fundraiser in New York and chipped in the rest for the roof. We shook hands, but there was no contract.

A few months later, I followed up, and the director said they hadn’t fixed the roof yet. It was troubling.

Now, I found out later that they are, in fact, getting the roof fixed. But without a contract, I would have had no recourse if they’d used the money for something else. That is why you get it in writing.

Give More When You’re Old

Americans donate an average of 3%–5% of their income to charity—more than any other country. Some people say you should give away 10%, which is essentially a tithe, but that is a lot.

Then you have people who give away too much—20% or more. We’re not talking about the Bezos-Zuckerberg-Musk crowd. These are people with ordinary incomes who should be saving, and all that charitable giving is eating away at their standard of living.

If you are a working adult in your 20s, 30s, 40s, or 50s, your priority should be saving as much as humanly possible and letting that money compound over time. That is how you accumulate the maximum amount of wealth.

If you really want to donate to cancer research, homeless outreach, saving the whales, etc. saving now will let you give more over your lifetime. That is the magic of compound interest.

Billionaire investor Warren Buffett is a great example of this. He pledged to give away 99% of his net worth before his death… starting at age 75. If he’d been giving away 10% all along, he would have had much less to give overall.

So, next time some mangy guy asks you for money, keep the $5 in your pocket and give less during your prime working years. Then, when you’re old, give away as much as you want.

Oh, and when the time comes, give it anonymously.

Jared Dillian