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A few weeks ago, I received a telephone call from a well-meaning young woman. She was making cold calls from a list of members of the local community to ask for donations for a poor family. “The parents have no money. Both of them are working, but they can’t make ends meet. Right now, they and their five children are living in a very small rented apartment with no beds and debts that are impossible to pay,” she told me.

But while I felt very sorry for this family, I wondered if the answer was to simply raise money and hand them a check. (Before you read any further, don’t think I am suggesting that charity is a bad idea. Quite the opposite! I encourage everyone to try to give 20% of their income to charity. See this great example of kids giving charity.)

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As I don’t know the particular circumstances of this individual family, I can’t say too much about their specific situation. However, many times I’ve noticed how families enter the cycle of debt because they have never been taught how to use their money properly. Even if both parents are working, they can drown in debts that may have started right from the beginning of their life together. Perhaps when they first got married, they were so sure of their new independence and life together that they didn’t stop to think how much money they were spending. Right at the beginning, they wanted a new dining room set, or they decided that as a young couple they should eat out at restaurants twice a week. They wanted to start out with an easy lifestyle. Perhaps they wanted to live higher than their parents who had nothing, or maybe they didn’t want to face a drop in the high standards that they enjoyed while living at home during their single years until they could make enough money to be able to maintain that kind of lifestyle themselves.

There could be so many reasons, but the underlying cause of the problems of many families is insufficient financial education and learned negative spending habits. If you grow up in a home where there is no concept of saving, and borrowing from one loan fund to pay off enough is considered as standard financial behavior, it’s very likely that you will end up inheriting the same bad fiscal habits unless you make an effort to learn differently.

The greatest gift that you can give to someone who needs your financial assistance because they are overwhelmed with debts is to encourage them to help themselves. While your check can pay off their current debt, it will only act as a Band-Aid, keeping them out of trouble until the next time. But if you can encourage them to look for a better-paid job, take a course on budgeting and money management, and to open a savings plan at the bank, you are giving them something that is a lot more valuable than any money.

Of course, charity doesn’t only mean giving to others. Sometimes, you need to be the recipient of your own tzedakah because the bottom line is that you are the only person who can really help yourself. So if you want to know more about planning for retirement, saving, and running your personal finances more effectively, start by reading self-help articles, attending budgeting courses, and adopting better monetary habits.

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Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd, a financial planning and investment services firm specializing in working with Americans living in Israel who have investment accounts in America. Doug’s newest book, co-authored with Susan Polgar, about using chess strategies to improve your finances, Rich As A King can be purchased at www.richasaking.com. He is a licensed financial professional both in the U.S. and Israel. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, FSI. Accounts held at Pershing LLC., Member NYSE/SIPC, a subsidiary of The Bank of New York Mellon Corporation. Neither Profile nor PRG gives tax or legal advice. Before immigrating to Israel, it is advisable to consult with a tax attorney who is knowledgeable about Israeli law. Contact at doug@profile-financial.com

4 COMMENTS

  1. the key, doug, imho, is to not only strive for rambam's highest level of giving (giving someone a handup instead of a handout), but to do the due diligence required to be sure that the recipient is indeed in need. way too many problems with giving tzedakah out there….please give wisely!

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