Why do we donate to charity?

Anouk Fülöp
Anouk just finished her Bachelor EBE and is currently working as an intern at Philips. She is interested in Behavioral Economics and current events.

It is almost December! December is one of my favourite months. I’ll admit, I’m not a big fan of the cold and the rain. What I do love though is Sinterklaas, Christmas and New Year’s. Just spending time with family and friends. It is the month of celebrations and the month of giving. One of the big events in the Netherlands is the glass house of 3FM Serieus Request, where everybody listens to music and donates money. Last year they collected an amount of 8.466.249 euros! But why do we donate money to charity?

There are different ways to donate money. First of all, you have the big events like the glass house or the phone lines opened after a disaster has taken place. Secondly, there are people going from door to door collecting money for their chosen charity. And finally, you can transfer money to the charities. Some people do this every year, quarter or month to one or multiple charities. According to the CBS, the average household in the Netherlands spends about 400 euros a year on charity.

The figures of the CBS also show that the average age of the household influences the amount of money donated. The older the household, the higher the amount donated. As a student you build up a loan, which only increases when you are a young professional buying your first house. After a few years you start making some more money and you can spend some more on charity.

So why do we donate to charity? Looking at the common economic theories there is no explanation to be found. In those theories we find the economic man. The economic man thinks about himself and wants to maximize his utility, his gains and happiness. He can be described as egocentric, selfish even. So there is no way that he would willingly give away money to charity.

But then where can we find the explanation? We have to look at behavioural economics. In multiple studies about this subject several explanations can be found, like altruism, awareness of need, reputation, social pressure and psychological benefits. Of these reasons altruism is mentioned a lot. There are different types of altruism, namely pure and impure altruism. With pure altruism a person gives because he believes in helping others, even when it has a personal cost with no benefits. On the other hand, impure altruism is when a person does care about another person, but gives to make himself feel better. Next time you donate money, it might be interesting to take a moment and think which type of altruism applies to you.

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