How I Automated Equity and Dividend Donations to Charity

Disclaimer: This is not financial advice. I am simply showing my method and reasoning for why and how I automated equity and dividend disbursement donations. The following text should be read as a friendly exchange instead of from a trusted Chartered Financial Analyst.

Why I Automate Charitable Giving

As a college student, money is always tight. Between paying for food, rent, and other necessities, it's hard to make sure that I have enough left over to make charitable donations. As a result, I've been on the lookout of ways to build systems that allow me to put money aside for donations without heavily restricting my cash flow. The best way that I found is donating equity dividends to charity. In this post I will show you my donation strategy that allows me to automatically put aside money for charitable giving while allowing me to grow my portfolio holdings.

Financial Tech Services I Use

I use SoFi financial as my banking and brokerage partner for the time being. I have considered switching to a more environmentally friendly bank such as Ando, however SoFi's all in one approach to finance has entrenched me in their services, and as such has increased inertia to switch. If I were to do it again I would have started with Ando and used a specialized brokerage  platform such as Fidelity or Vanguard. These services also have the additional added benefit of better customer support.

The most important thing is that your brokerage partner must support depositing dividends into your bank account (most do, however you should look out for Dividend Reinvestment Programs, or DRIP only brokerages). There are bonus brownie points if they allow for algorithmic interaction for money transfers and trading, however this is not necessary if you simply donate once a year instead of donating on dividend issuance.

Setting Up Dividend Issuance for Donations

To set up dividend donations, you should forward the dividend disbursements to their own bank account. In my case I have them forward to my savings bank account, as I exclusively use my checking account for all regular matters. This means that I can easily and at a glance look at the amount of capital that has been contributed and get a rough estimate of what my donations will look like for the year.

Choosing Which Equity to Invest In

I am strong environmentalist. As such, I wanted to make sure that the equity that I was supporting has my priorities in mind. In addition, I wanted to invest in an ETF so I could get adequate exposure to a variety of companies without having to actively manage them. In addition, I wanted as low of an expense ratio as possible. As a result, I settled on the iShares Global Clean Energy ETF (ICLN). The expense ratio is 0.40%, and the dividend yield is 1.12%, which allows a moderate amount of capital to be socked away regularly into the donation fund. In addition, the fund has a 95.2% MSCI ESG coverage, which means that the fund is highly vetted for ESG purposes.
Note: this is not an endorsement for ICLN. You should do your own research. Most of all, you should find a fund that you personally align with.

Snowballing Your Automatic Donation Machine

The most important factor of all is making sure that you are making regular contributions to your donation machine. This will allow your equity to accumulate in value while simultaneously making your dividends more numerous as time goes on. I point all of my SoFi rewards points, including credit card rewards, to the donation machine. As of last month that accounted to roughly $10. While this sum may not sound like a lot, any contributions matter. In addition, I throw a small sum into the machine every month to make sure that my donations are compounding. Lastly, all revenue from my blogs and projects goes directly into the machine. Setting aside these small amounts of money leads to big results over time. I will post an update on September 1st of next year to show my progress and more concrete financials for the machine. 

Stay Crazy, Stay Fun - John

Additional Reading

How To Donate Stock To Charity In 2022, Forbes, 12/8/2021

How to automatically donate share dividends to charity, Monevator, 3/16/2021

Do I get any tax incentives if I donate my dividends to charity?, Quora,  5/14/2018


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