Disclaimer: I am not a financial advisor. This is not financial advice.
Effective altruists often debate the question of whether to give now or later. One common approach is to give a regular donation each year. This approach makes a lot of sense: here Holden Karnofsky suggests a few reasons why we should give regularly.
But one problem arises with the “give regularly” strategy. If you’re young, and especially if you’re still in school, you probably aren’t earning much money right now, so you can’t donate much. You will earn a lot more money five or ten years from now, which means you’ll also be donating a lot more. If you’re currently a student and you follow the “donate however much I can afford every year” strategy, you end up leaning heavily toward giving more later.
This mirrors the problem described by Ayres and Nalebuff in Lifecycle Investing: if you’re saving for retirement, you end up saving a lot more money later in life. They recommend that most people leverage investments when they’re young and hold more bonds when they’re older in order to spread risk more evenly across their investing lifetimes (or, as they put it, to improve temporal diversification).
We can apply a similar principle to donations. If you don’t earn much now but expect to earn substantially more in the future, you can “leverage” your donations by donating more than you normally would given your income.
It’s not obvious how to do this. There are three basic methods I can see: taking out loans, foregoing savings, and donating trust fund savings. None of these is perfect, but they’re worth considering.
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