“Rich gifts wax poor when givers prove unkind.” – Shakespeare (Hamlet).
“There is no benefit in the gifts of a bad man.” – Euripedes.
“What is bought is cheaper than a gift.” – Proverb, unknown.

When we hear the word “gift” it often comes with such a positive connotation. We think of loved ones and holidays; the benefits of gifts received as well as gifts given. Nostalgic feelings of that childhood bike or a wonderful concert with a loved one may wash over us. Along with alcohol, gifts are the main way that we celebrate.
It is how we recognize birthdays, anniversaries, and even religious holidays.

However, we often forget the potentially dark side of gifts. I believe it is Plato’s Republic that warns there are two major types of tyrants: those who exert power by force, and those who exert power through gift.

The Dark Side of “Service” Gifts

By now you may be wondering how this fits into personal finance. By the end of this post I will explain the high price that sometimes comes with gifts and how to protect your autonomy against gifts that, no matter how well intentioned, may in fact potentially be subtle or not so subtle exercises of control.

It is an admirable quality in any adult to attempt to be fully self-reliant. All too often, however, we allow ourselves to become too reliant on others. In doing so, we may be compromising our own ideals.

For instance, it is common for busy parents today to seek the help of our parents in raising our children. Child care costs are expensive and we are living in a world that is more reliant upon both parents working than ever. The solution: we turn to family members to help watch/raise our children.

Our parents or other family members are often outwardly happy to assist. Unfortunately, such an arrangement is not without risks, for either the gift giver or the gift recipient.
The gift giver may begin to feel he or she is being taken advantage of. They may even begin to resent the arrangement but feel guilty about saying anything or taking steps to change it.

Meanwhile, the person whose child is being watched may look the other way when the “sitter” does not watch the child in a manner consistent with the parent’s instructions/ideals. Whenever we are reliant on another person, we are in danger of selling out our ideals or being pushed into a corner by that person. As for the gift giver, as they say: “no good deed goes unpunished.”

The Dark Side of “Possession” Gifts

Recently I was given a nice house warming present. I did not ask for this gift, but I was at the time happy to receive it. However, the gift-giver (a family member) then proceeded to attempt to tell me where I should position this gift in my house. Being that the gift was heavy, I did not want to go along with the gift giver’s vision for my own home. When I held firm with where I wanted it, the gift giver later remarked that I was unappreciative to a third party and has not spoken to me since.

Taking the same issue from another angle, however, as a gift giver, how would you feel if you learned that the person you gave an expensive present too then turned around to re-gift or sell that gift?

I have a friend whose parents bought him a brand new car stereo. A year later he sold the car, stereo included. His parents would not talk to him for weeks, saying he was not “grateful” for the car stereo gift.

When you are in receipt of a gift, and particularly an expensive one, you will never truly “own” it the way you would an item you yourself purchased. This was why my wife and I made sure we did not need any help from our families for the down payment/closing costs on our house.

The Dark Side of Money Gifts

Money gifts can be particularly dangerous, especially if they are recurring. First, as a starting point, how many families have been ruined by unpaid loans? That is why many experts recommend doing away with inter-family loans entirely and simply “gifting” as much money as you are willing to give, if any. However, there is a dark side to this practice as well.

In today’s Great Recession economy, there are more and more people who are in need of financial assistance. Often times, people will rely upon their family members to make up for a tough financial stretch or a monthly shortfall. I see this in particular with recent college graduates who are still living with and/or financially relying upon their parents, hence the nickname “The Boomerang Generation.”

Oftentimes the gift recipient could learn to meet their financial obligations if they were forced to. They might have to give up cable or other such non-essentials, but it could prove to be a learning experience and an opportunity for self-growth. Moreover, if you are the gift-recipient you will feel guilty every time you spend money on a non-essential item. If your dad has just gifted you $1,000 for your mortgage and you then go on an expensive vacation, it is just simply a recipe for a confrontation.

In other words, you will lack a feeling of personal autonomy and dominion if you take money from others. If this can be avoided, it is probably for the better, even if you have to do without steak dinners or cable for a spell.

In the well-known personal finance classic The Millionaire Next Door the authors titled a chapter: “Affirmative Action: Family Style.” This chapter dealt with parents who propped up their children’s bad financial decisions to such a point that the children never gained the skills necessary to stand on their own two feet.

I have a family member who is 55 years-old and still lives with his mother. He has no money in the bank even though he has held decent jobs for long stretches at a time along with hardly any expenses. He spends his money on football season tickets and expensive vacations.

I often wonder if he would have been better off had his parents kicked him out of the house when he was in his early twenties following college? Perhaps that would have been a needed wakeup call and taught him the necessary skills to stand on his own two feet.

Instead, he has remained at home and never learned to be self-sufficient. The family often whispers about what will become of him when his mother, who is now in her eighties, finally passes away. The many gifts that were bestowed upon him over the years: such as the free room and board, the car insurance paid for by his parents, and much more, have weakened his financial immune system, to the point that he now lacks the strength to support himself despite having no real disabilities or encumbrances. That is the dark side of continued financial support.

The Dark Side of Gifts: Conclusion

Who hasn’t received a “gift” that made the gift-giver look worse because it was obviously re-gifted or too insignificant?

Who hasn’t been stressed out by receiving too large of a gift? “How can I ever repay them?,” you worry. While many gifts are given with the best of intentions, we have to keep in mind that personal sovereignty is in most instances the key to a happy life and a financially balanced existence. “Gifts”, whether from the government or from loved ones, often come with strings attached, whether we see them or not.

At the same time, we as gift-givers must be careful to not be taken advantage of or to harm another through the gifts we make. In doing so, we can avoid the dark side of gifts, and focus on the most important gifts we can give: our gifts of friendship and love.

Have you ever received a “Trojan Horse” of a gift? Please share your experiences with the dark side of gifts, both as a gift-giver and a gift recipient.

The above was a guest post by CT, the creator of Freelance PF. CT blogs on the FreelancePF company website about the nature of freelance work as well as personal finance. FreelancePF offers freelance writing, blog development, consulting work, blog creation, and other freelance services. FreelancePF specializes in personal finance freelance work. FreelancePF Blog Network also features other personal finance blogs created/run by CT. To inquire further or hire FreelancePF, you can visit the FreelancePF website.

It is a mistake to think that frugality and charity are mutually exclusive. “I was trained from the beginning to work, to save, and to give,” said noted philanthropist John D. Rockefeller, Jr. Even if you are not a Rockefeller, these three rules can be applied to your family’s monthly budget—no matter how tight.

In tough economic times charitable donations trend downward, but people do continue to give. According to a study by the Center on Philanthropy at Indiana University, 65% of U.S. households gave to charity in 2007. The average annual household contribution was $2,213 and the mean was $870. This works out to around 3% of annual income for most households, according to charitynavigator.org.

If you are clipping coupons and trimming expenses, $2,213 probably sounds like a astronomical sum. But there are many ways to work giving into your budget without torpedoing your ongoing efforts at thrift.

Give Frugally

If you intend to make charitable contributions during the course of the year, plan ahead to make every dollar count. Here are a few hints to help you get the most bang out of your charity buck:

Trust, but Verify—Determine which charity is most in line with your interests and beliefs, then investigate the charity’s financial practices, especially its overhead costs. Make sure the charity meets IRS qualifications so that your donation will be tax deductible.

Double Up—If your workplace offers a matching program, review program rules to determine the level of matching (some programs match dollar for dollar, others are percentage-based). Small donations throughout the year can add up to make a big impact when coupled with your employer’s contribution.

Give as You Go—If a payroll deduction seems too much to bear, then consider signing up for an online giving program such as iGive.com. Your online purchases from affiliated vendors generate small donations to your chosen charity. If you shop online frequently, these donations will add up quickly.

Gifts with Meaning—If you are stumped for a gift-giving idea, you can make a charitable contribution in someone else’s name. Many charities like Heifer International and The Nature Conservancy offer gift programs and will even send a card to the recipient detailing the gift that was made in his or her honor. These donations are a great idea for the person “who has everything,” while helping you increase your annual giving

When the Well is Dry

If you are scraping to make ends meet and can’t spare cash for a donation, there are still ways to work philanthropy into your budget. During the holocaust, teenager Anne Frank wrote, “How wonderful it is that nobody needs to wait a single moment before starting to improve the world.” Don’t let a lack of liquidity stop you from starting to improve the world:

Purge—Go through closets, the attic, and the basement and donate unused items in good condition to Goodwill, your hospital auxiliary’s thrift shop, or other collection site. Remember that many organizations accept housewares, electronics, and even furniture. Ask for a receipt and follow IRS rules for non-cash charitable donations.

Think Outside of the Box—When cash is tight, think of other ways to give. Donate art or antiques to a charity’s fundraising auction. Place land in a conservation easement. Donate a clunker car or boat. Even accumulated airline miles can be gifted. Take an inventory of tangible and intangible assets and determine which items you can donate.

Give of Yourself—According to the National Philanthropic Trust, the estimated dollar value of volunteer time was $20.85 per hour for 2009. By volunteering your time to a charitable cause—be it building a house with Habitat for Humanity or volunteering at a literacy or food bank program—you can make a difference in your community.

Giving as a Way of Life

Perhaps no one exemplified Rockefeller’s work/save/give advice better than Lake Forest College alumna Grace Groner. After living through the Great Depression, she worked as a secretary at the same job for 43 years. She lived in a Spartan, one-bedroom house and led a simple, frugal life. When she died, she left a whopping $7 million dollar endowment to her alma mater. We may not all be in Ms. Groner’s league, but we can all make a positive impact in our own way by making giving a part of our financial strategy.

The grim realities of our sluggish economy, coupled with the fact that so many people are struggling to make ends meet, loom larger during the holiday season. Nevertheless, there is no need to feel stressed. It is possible to navigate this process and not bust your holiday budget.

First of all, remember that holiday tipping is a gesture. It is not just about the money. If I could wave a magic Yuletide wand and ensure my wife’s hairstylist had the happiest of holidays, I am sure she would prefer that to any check or gift card we could hand out. But barring that, our holiday tip is a way to show appreciation to individuals like her who provide services for my wife and my loved ones.

When setting your tipping guidelines, think about everyone who has provided services for you and your level of interaction with them. Avoid framing your decision to give a holiday tip solely because you feel it is expected of you.

Ironically, we often skip over the very people who should get a holiday tip simply because they do not put themselves forward. Here are some scenarios to help you work through the ins and outs of tipping etiquette, circa 2010:

Hairstylist

If your regular hairdresser gets a great tip every time you visit them, you will not violate tipping etiquette if you don’t give them an additional holiday tip unless they are re-arranging their schedule to fit you in to get the special hairstyling that you absolutely must have before your big holiday party.

Suggested holiday tip for that stunning holiday hairdo: 50% over the standard amount that you ordinarily would tip for a hair appointment.

Pet Sitter

If your dog walker or pet sitter did a great job all year, and also showed up at your house during the biggest snowstorm on record and brought your pet their favorite treats when your grocery store was snowed in, now is the time to show that you value their going the extra mile.

Suggested holiday tip for loyal dog walker: Equivalent of what you would pay for 3 visits, plus a new pair of mittens to replace the ones that your dog chewed up.

Tutor/Teacher

Your child’s tutor or school teacher can make excellent use of a gift card to your local book, office supply or arts and crafts store. Rather than presenting them with cash, by giving them something that enhances their ability to do the work they love it is a win/win for everyone.

Suggested holiday tip for fantastic teacher: One or two $25 gift cards.

Housekeeper/Housecleaner

If you have decided to outsource housekeeping to free up more room in your schedule, be sure to acknowledge those who keep your home clean.

Suggested tip: $65-$70 for the average house, or the equivalent of what you’d pay for a week/biweekly cleaning.

Newspaper Carrier

Talk about a thankless job. Up seven days a week in the cold, dark wee-hours of the morning to get a fresh copy of the newspaper to your driveway.

Suggested tip: $20 or so. Come on, you probably leave tips of half that for one meal out at a nice restaurant, and those servers only brought food and drink to your table from a warm, dry kitchen at 6:30 in the evening.

In sum, if you can afford to be generous, this is the time of year where your generosity can have a big impact. If you are financially strapped, that fact of your being a good customer is, in itself, a boon in these difficult times.

In this situation, consider sending someone who has provided services to you a holiday card thoughtfully acknowledging their service. You also can add that you intend to continue being a loyal customer in the future.

That was until two sources of inspiration smacked me in the face and encouraged me to get moving. The first was a comment left on last week’s post, The Proper Rate of Savings.  ”Philip” commented, “I’d like to see a post on the proper giving rate.” The makings of a new post were now in development.

Just this morning I read a post at No Debt Plan about DonorsChoose.org – Use Donors Choose to Support Your Local Schools.  The post introduced me to Donors Choose, and specifically to the author’s wife’s classroom project. His wife, a music teacher, is trying to raise money for two drums. Faced with a limited budget (even more limited for arts and music, I suspect), she is turning to community support to fund the purchase of these drums for her students.

It was at this point that I was inspired to take action. I have managed to build a large community here at Frugal Dad, and I like to think I’ve helped a few people along the way with money issues. But honestly, I don’t feel like that’s enough. Quite often I write about the need for improved financial education for kids, and education in general, and unfortunately many kids do not get that education because of limited resources available to teachers.

Not only are teachers grossly underpaid, in my opinion, but they are expected to cover many classroom expenses out of their own pockets. Considering we live in a world where six-figure salaried businessmen expect to be reimbursed for $10 cab fares, I think asking teachers to foot the bill for supplies is ridiculous.

My reluctance to donate to charities in the past was in part due to the fact it is hard to see where your contributions make an impact. Even if most of the money is put to good use it isn’t easy to see the direct impact of your support. That’s why the model at Donors Choose intrigues me.

Teachers and administrators list needed equipment for their classrooms. The requests and associated costs are vetted by Donors Choose representatives and the projects are made public. When fully funded, Donors Choose orders the materials, ships them directly to the school and notifies the school’s principal – reducing the chances of fraudulent requests. The requests also often include class pictures, thank-you letters from the class, etc. It’s really a heart-warming way to make a difference.

While I don’t have all the details down just yet, I plan to incorporate support for these projects into my work here at Frugal Dad. For now, I’ve included a link in the navigation menu above to my “Giving Page” at DonorsChoose.org. Here, I have hand-selected a few classroom projects that are meaningful to me, such as those that support financial literacy, autism and sensory disorders, writing, and other topics.

Other than this initial post, I won’t bombard you with messages about the giving project. If you can help with financial support, great. If you can’t, that’s fine, too. Perhaps you could mention the project on Twitter, or email it to friends. There are plenty of ways to support the cause without giving money.

I know this is a bad time, economically speaking, to be mentioning a giving project. We’re in the middle of our own budget crunch trying to pay off remaining debt, rebuild our emergency fund, and put a little away for a vacation in the next several months. Still, I should be able to carve out a little for this project.

Putting My Money Where My Mouth Is

To kick things off, I’ve donated all ad revenues from today towards the project featured at No Debt Plan, since it was his post and his wife’s idea that inspired me to get going on this project. (Update: That project is now fully funded, so I’ve decided to support a local project in my kid’s school district).

In the coming weeks I’ll donate a percentage of ad revenues to go towards the projects featured on my giving page. In addition to those projects, I’d encourage you to browse requests in your own community. You’d be surprised how many things are needed at your neighborhood schools.

Finally, to Philip’s original comment, giving is a personal decision. There is no proper giving rate, as it is a decision to be made with your family. Apart from examples such as tithing, there is no set amount a family should give. My recommendation is to give as much as you can without straining your own budget, and just enough to fill your spirit with the joys of being a giver.

The late Larry Stewart is credited with starting the Secret Santa movement as he passed out over a million dollars in gifts in his 26 years playing Secret Santa in the Kansas City area.  After his death, an army of Secret Santas have taken up his cause.  An excerpt from the AP story provides a great example of the impact even a relatively small gift can make on a person’s life:

Cynthia Brown, 40, was laid off three weeks ago from her food service job. Santa found her at the St. Louis County health clinic and gave her $100, exactly what she had asked to borrow from her mother a night ago to buy food.

“I have three daughters, and I can’t get unemployment yet. I was down in food,” she said.

I imagine Ms. Brown’s life was forever changed at that moment.  Not because the $100 will solve all her financial problems, but because she was blessed by the generous gift of a complete stranger. The Secret Santa letter had but one string attached, and that “is that you do something nice for someone. Pass it on.”

In addition to participating in The One Dollar Give, this year my family is planning a little Secret Santa gift giving mission ourselves, but I can’t give details because then it wouldn’t be a secret!  I encourage you to find a way to perform a random act of kindness for someone else during the holiday season.  It doesn’t have to be expensive, in fact, it doesn’t even have to involve money.  Roll a neighbor’s trash can up from the street before they get home. Take some bake goodies around to neighbors on the weekend. Offer to cook a warm meal for a family going through a tough time. Volunteer some of your time to help a shelter or local charity. The point is to find a way to brighten the holidays for someone else.

I would love to hear your Secret Santa ideas for spreading a little holiday cheer this year.

Music-clubs.com

Mandi and Tara had a fantastic idea to harness the collective power of bloggers.  The One Dollar Give project was launched December 1st, and its mission is to feature a blogger’s favorite charity each day during the month of December.  You can support all thirty one charities by giving just one dollar a day to each of the sponsored organizations.

I jumped at the chance to help with this project, and will even submit a write up about a charity I have had personal experience with this time next week (it will appear on The One Dollar Give site, but I’ll put a mention here to direct readers to their site). 

If you are unable to help financially, there are other ways to show your support.  If you are a blogger, feel free to grab the button in this post (or in my top right sidebar) and put it on your blog.  Maybe you could also mention it on Twitter, or in a blog roundup of your own.

Let’s face it, it has been a rough year for a lot of people, and charities in particular are feeling the pinch. One dollar may not seem like much, but imagine if just half of my subscribers (some two thousand people) pitched in one dollar to help a sponsored charity. I’ve pledged $31 for December by striking a video game purchase from my Christmas shopping list, and may give a little more at the end of the month with what I have left over. 

Thanks for allowing me a day to write about such a special project.  We trade a lot of ideas on saving money and building wealth here at Frugal Dad, and ultimately I hope we are all wealthy enough to give some of it away.  There is no greater joy than helping others, especially during the holiday season.

We have recently attended a number of weddings, birthday parties and other celebrations.  With little time to shop for gifts we resorted to giving cash or gift cards in most cases, but from now on I think I’ll opt for simply giving cash.  Here are a few reasons why:

• Cash can be spent anywhere.  Unlike gift cards to specific stores, cash can be spent anywhere.  I always appreciate receiving a cash gift because I spend it in whatever manner I want.  Gift cards and gift certificates do not provide the same flexibility.

• Cash can be used for things other than spending.  Depending on what stage you are in of your financial turnaround, it might make sense to hang on to the cash gift, or use it to pay down debt.  In the past I have considered selling gift cards on eBay (for slightly less than face value) just to get the cash value to apply towards other goals. Newlyweds may be particularly appreciative of cash gifts to cover honeymoon expenses.  In fact, cash has become such a popular wedding option in Israel that couples are renting ATMs that allow wedding guests to transfer a sum of money in the newlywed’s bank account with the swipe of a credit or debit card.

• Gift cards may get lost. I am notoriously bad at keeping up with gift cards, and the remaining balances. If I toss the cash gift in a separate envelope I know exactly how much of the gift is left by simply counting the money.  That’s a lot easier than calling a 1-800 number and wading through a sea of voice prompts.

• Giving cash to kids helps reinforce spending lessons.  It is true what they say, spending with cash hurts.  When you hand over that $20 bill you got in your birthday card and get three pennies back it registers.  When you swipe the same amount on a gift card it just doesn’t create the same kind of mental lesson of separating you from your money.    What a better time to reinforce this lesson than when kids are young.

• Gift card balances are rarely fully redeemed.  Of course, this is primary reason retailers offer gift cards.  Unused portions of gift card sales eventually add to the company’s balance sheet.  Best Buy compiled its gift card redemption statistics and found that of its unused gift card balances, the average card had been held and not redeemed for about 2.2 years.  It’s probably safe to say the majority of those balanced will never be redeemed.

• Some gift cards and gift certificates expire with little warning.  I gave my wife a gift certificate for a day at the spa a couple Mother’s Day ago, along with the promise of keeping the kids out of her hair and letting her enjoy a day of pampering.  It was a while before we scheduled the spa day, and were disappointed to find out the gift certificate had expired the month before.  Fortunately, after talking with the spa owner she was still able to use it, but it made me recognize that if I had simply paid for the spa day on the day she visited we would have not had to worry about expiration dates.

Would you rather receive cash or a gift card?

The first two episodes were about what I expected, but as the stakes were raised and the dollar amounts increased, I became more disappointed with each new show. In the March 23 airing contestants were asked to give away $100,000 in twenty-four hours. The stipulations were you could not give away more than $500 to any one person, or $10,000 at any one location, and you could not simply give away cash.

I was surprised when none of the contestants visited local churches, hospitals or social services offices. These seemed like obvious places to look for people who are hurting, emotionally, physically and/or financially. Most churches have a long list for their benevolence funds, and not all of them are requests for cash money. Many families need help making a car payment, or getting their mortgage caught up just to get back on track. Others may be recovering from a serious illness and are buried in medical bills, or have experienced a disaster such as a house fire or flood and have lost all of their belongings.

Many municipalities are closing city pools and recreational facilities because of a lack of funding and dilapidated equipment. I can just imagine a local Boys or Girls Clubs in Miami would have loved to have received a new basketball goal, or other updated recreational equipment for their facilities. Orphanages are frequently in need of linens and meal supplies to care for young people in their charge. Soup kitchens and shelters struggle to keep staples such as flour, bread, meats and rice in stock. There is no shortage of stories of victims of Hurricane Andrew still living in homes in need of repair, fifteen years after the hurricane blew through Miami. $10,000 would have gone a long way at each of these places.

Instead, some contestants bought groceries for random shoppers, gave away flowers at an intersection ($2,000 worth), and donated pet food and supplies to an animal shelter. These were all noble deeds, but I thought the name of this game was Big Give! These contestants were guilty of thinking small.

I was once part of a corporate initiative to implement a process improvement plan throughout the company. Our trainer had us perform an exercise in the very beginning of the 6-week training course called “think BIG.” Basically, each team was given an idea and told to expound on it as many times as we could in ten minutes. My group received the task, “Start a youth sports program – your existing budget is $0.00.” We started frantically throwing out ideas and capturing them on a worksheet. Separating each line on the worksheet were the words, “think BIGGER!“

After completing ten or eleven lines we had a strategy to start a youth football league sponsored by area businesses and local sports teams. A new stadium would be built using a combination of public and private, corporate-sponsored funds. Concession sales and banner advertisements lining the playing fields would pay for ongoing maintenance. Not bad for ten minutes of brainstorming. However, if the words “think BIGGER” had not appeared under each idea we might have stopped with “sell Krispy Kreme donuts to raise some money.”

Most people stop thinking big somewhere along the way. We all settle into our lives and outgrow those big dreams we had as a kid. I’d encourage anyone reading this to “think BIGGER” when imagining what we could do collectively to help other people. It’s easy to sit in my living room and play armchair quarterback, but I would like to think if I had a chance to give away $100,000 to people in need I could find more worthy recipients.

Image Credit: Daily News