The theme of Future Legacies blog postings has been to suggest money be set aside for public or charitable works for a great length of time. Donations from future legacies become sizeable only after waiting for fifty or more years. At one hundred and fifty, the gains really add up. Is waiting that long for a novel experimental approach to future charitable funding a good idea?
To address this question, we'll examine what exactly we are concerned about, whether any acceptable parallels already exist; whether the waiting time is reasonable; and whether supporting the future is of interest for donors today.
Why save now for future charity needs?
The main issue is if seed donations will bear fruit and be useful in the future. The opposite problem is the money would be helpful now.
Ben Franklin created a way to save up money for two hundred years after his death. Franklin's Last Will asked that in the year 1990, all remaining savings be donated. These millions of dollars on offer kicked off a frenzy of public requests. The point is Franklin did not know what or even if societal needs would exist after two hundred years. But they sure did! Donors today can be assured donations maturing in the distant future will be also useful.
Yes, money spent today to support charities is essential, and we never have enough.
However, the very reason we do not have enough today is in part because we did not set aside money centuries ago to grow and to now sustain our needs.
Balance is the best answer to this question. All donors should balance how they divide their donations between the present and future needs, with typically and ideally, the present portion being the larger.
How can we save now for future charity needs?
Money invested a mere fifteen years can create seed money for future legacies. Here is how: after fifteen years at five percent return, amounts in any fund double. This doubling allows half to be donated and half reinvested. Continuously reinvesting half the funds permits on-going doubling of donations every subsequent fifteen years. Waiting such a short time for the benefit of on-going future donations is worthwhile.
Different forms of money may exist in the far-off future, such as digital currency or other kinds we can't imagine today. The point is an exchange would be possible from one form to another. Even if money per se does not exist, some mechanism for the barter of goods and services will exist, as it has for millennia.
Markets fluctuate, wildly at times, and are a big concern if you need the money now. However, the intensity of fluctuations fades over lengthy periods. The Dow Jones index plummeted from a high of 300 points to barely 40 points in the early 1930s, dropping 260 points or 87% from the 300 points high. In February 2020, the same index hit a high of 29,551. After nearly one hundred years, the amount lost in the '30s represents a mere one percent blip.
In some sectors, are we already spending for the future?
Several social spending areas, such as building a transit system, adding electric generation capacity, and building hospitals or schools, can take nearly a decade to plan and construct before benefits can begin. Many cathedrals and other religious buildings have taken over 150 years to build, often delayed as funds were unavailable.
Pure scientific research is an example of money spent on uncertain outcomes. Some vaccines take many years to find or may never happen. Polio took about 60 years to approve; Ebola took 17. SARS and MERS still have no approved vaccine, after 17 and 6 years, respectively. Money spent on the Large Hadron Collider to search for particles that exist merely within mathematical theories equals one billion US dollars annually. Like Voyager, Pioneer, or the Mars Observer, spacecraft typically cost one billion to learn more about distant planets and objects invisible to the naked eye.
Should a significant fraction of taxes go to scientific research when it thereby reduces spending on access to health care, combating homelessness, or ensuring food security?
Balance is the key. If no money goes towards long term efforts, we potentially may miss huge opportunities. For example, how many potential Einsteins are unable to get the education they need?
Is the waiting time reasonable?
In several of the above examples, the time to deliver benefits may be short or long. Short for projects completed in a decade or two and those used before completion. Long for projects with uncertain benefits, or in the case of some vaccines.
Depending on the plan, a charity could recoup the originating seed funds within one or two decades. This period seems reasonable, considering the added potential future returns.
Urgency must direct the balance. Money for hurricane relief should immediately receive a ninety-eight percent portion if not all. Money for pure research perhaps could allocate a more considerable amount, such as twenty-five percent to future funding initiatives.
Thus, waiting for decades and centuries is not unreasonable; the issue again is balance.
Is supporting the future of interest for donors today?
One cannot address this critical question by looking at existing charitable donation scenarios. A real-world test market for a future legacy product would be a great way to gauge this interest. Results from a targeted offering could be used to predict similar donor action.
In an Oct 2014 BMO / Ipsos Reid High Net Worth Individuals report, the top two drivers of donations were 55% to 'impact the world/community' and 50% to 'give back.' Only 22% of those survey said, 'saving taxes.'
Given these two main drivers are for change and sustainability, these donors may value an opportunity to address the future that does not exist today. By funneling the donations into a charitable foundation that supports Donor Advised Funds, the individual donor can establish donation portions for various causes and allow descendants to do the same.
In conclusion, keeping the present and future needs in balance and letting donors address their charitable interests is a wise investment for today and for our society's future.
Stay safe,
Cheers,
Cam Anderson
Email: Cam@FutureLegacies.ca
Coquitlam, BC, Canada
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