Why I Never Give MONEY to Panhandlers

2018-05-07T13:06:22+00:00

One day exiting the freeway while driving home from work I was cut off by a man driving a silver Nissan GTR.  Awestruck by the rarity of seeing such a valuable car I quickly forgot about the distress from the near-accident. You can’t even take one for a test drive without bringing in your W2 to prove top-tier income.

My eyes remained fixed on the prized vehicle until we both rolled to a stop at the traffic light.  Entering my field of vision was a duo of panhandlers jockeying for position. It must have been a popular intersection for beggars.

Uncomfortably, I took in the contrast of two desperate beggars at the bottom of the economic spectrum fighting for visibility of their signage from the luxury car operator. One sign read, “Ex war-veteran, anything helps.” The other “single mother of five in need of groceries.” Neither had the desired effect on the well-off driver.

While reaching for spare change, many folks convince themselves that their donation will have a positive impact on an individual who’s down on their luck. Perhaps in situations similar to mine you’ve reasoned that your charitable donation could play a small role in lifting the beggar out of poverty. Unfortunately, it is doubtful that your offering helped the panhandler. In fact, I’ve found that, on average, giving money to panhandlers can have a negative net impact on that individual and society as a whole.

The Element of Time

Although it can vary with location, studies have found that career beggars make roughly $1,000 per month. This assumes that the panhandlers are actively seeking donations from the public in major cities for 40 to 55 hours a week. In more heavily trafficked tourist areas career beggars make up to $1,500 a month.

The key takeaway from the beggar income is not actually the dollar figure, but the time allocation. One of the largest barriers to entering the job market that the homeless face is their lack of job history or a significant gap in employment. While begging can produce a surprising amount of income, it takes an exorbitant amount of time to do so.

The $2 you give the homeless man encourages them to collect another $2 every 15 minutes. Meanwhile their skills, knowledge, and employability remain the same. Therefore, I could see an argument that unless you’re giving a beggar $1,000 and a business textbook, don’t bother.

Money Isn’t a Good Gift

In society, when a stimulus continuously creates a negative effect in the recipient, we try to limit their exposure to that stimulus; that is, at least until they are better equipped to handle it.

For instance, imagine a teenager who has too much freedom and gets into trouble because of the laissez-faire parenting. Let’s say that teen demonstrates an inability to police themselves late at night. Would you respond by eliminating their curfew altogether? Of course not!

So why then do we throw money at individuals with money problems?!

Perhaps you contend that money is a necessity to aid the poor in feeding their family. While that is valid, there are far more practical ways to achieve that end.

The first way would be gift cards to local eateries. Though street dwellers could hypothetically barter gift cards for drugs, it drastically decreases the likelihood that they end up converting your donation into contraband.

One organization, Dress for Success, uses charitable funds to provide free suits to homeless individuals who want to dress the part for a job interview. If their interview is a success and they land the job, they can swap the suit for a work outfit. Beneficiaries of this service have raved about its effectiveness.

So why not hand a homeless person a “how to” resume book and take them to a discount store to be fitted for a used suit? Doing something like that twice a year could have a far greater impact than occasionally giving a few bucks to panhandlers on street corners. Plus, aside from taking a little more time it doesn’t have to cost you any more than what you might already be donating.

Finally, shelter and cleanliness can represent a significant barrier to entering the job market for the homeless. Helping set up a PO Box, gifting a tent, and donating a portable shower wash station could be difference makers in a struggling individual’s life. Many who are down on their luck have no way of receiving mail. And a tent with a wash station could be a huge upgrade over their current predicament.

Organizations Handle Money Better

If all the previous suggestions seem like they’ll require too much effort, then sending your money to a long-standing charitable organization might be the best route for your altruism.

In the UK, organizations such as Crisis are known for their well-documented support of the homeless community. Backed by empirical research, Crisis fervently recommends against making cash donations directly to homeless individuals. Their organization operates with complete transparency. Crisis takes public contributions and allocates the maximum percentage to aiding the poor, while still managing to keep the lights on.

Crisis’ advocacy for fewer cash handouts to panhandlers is backed by recent studies conducted overseas. According to one such study, 80% of beggars used at least a portion of their proceeds to support a drug or alcohol habit. This makes sense considering between 60-70% of panhandlers self-report substance abuse issues.

Ever Wonder if the Homeless Person You Helped is Actually Homeless?

Giving money to charitable organizations mostly solves this issue. Coalition for the Homeless is a US based organization who services range from serving hot meals to in-depth job training.  Before offering services to folks in need, they gather background information on potential recipients to ensure donations go individuals with real needs.

Those who are critical of homeless organizations tend to point out that all the administrative work that goes on within poverty organizations shaves off the value of the dollars you donate.  While this is a fair point, many of the top charities in the US have only 10-15% overhead costs. Whether that’s acceptable or not is up for debate. But to me, it’s well worth it to ensure that 100% of my funds did not go to an undeserving recipient.

A Few Final Thoughts

Any time you donate, it’s make sense to do so with a purpose in mind. Though our hearts can be in the right places, unless we make sure our dollars are used to their full extent they are better off left in our pockets.

Next time you want to help a panhandler down on their luck, consider the issues that were instrumental in creating their current predicament. If your donation doesn’t help resolve the underlying issues then we are spinning our wheels as a society. So as much as I revere folks who are selfless in the face of suffering, let’s make sure we are solving problems and not creating a dependency loop.

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About the Author:

Darian
Hi, I'm Darian! I am a twenty-something insurance professional working on my ultimate quest for financial freedom. I hope you enjoyed this article. Stick around to learn more about financial strategies to manage debt, save more, spend less, and live the life you want.

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