Would you like to round up and donate the difference today? If you’re like 71% of people in the checkout line, you’ve opted to make charitable donations to a good cause at least once! 

When it comes to prosocial spending (spending for a good cause like making charitable donations), our brains are hardwired to err on the side of generosity. It makes sense—humans have managed to survive thus far by being prosocial and interdependent by helping and cooperating with one another. 

But why does it feel so dang good to give, and how should prosocial spending fit into your budget during the season of giving? This guide will give you the low-down on what happens to your brain on generosity and how you can get the most out of giving without blowing your budget. 

What is prosocial spending? 

Prosocial spending is a type of spending that involves giving in the name of good causes. You’ve probably done it without realizing it if you’ve ever: 

  • slipped a few dollars into Santa’s red pail outside the store 
  • intentionally bought products or services from social enterprises or small businesses 
  • donated a few dollars to someone in need when you cross paths on the street 
  • purchased a box of Girl Scout Cookies (it’s Thin Mints or bust for me) 
  • participated in a walk or run for a good cause 
  • given money to a charity of your choice 

Prosocial spending is all about consciously giving to make the world around us a better place. It makes us feel better about ourselves, too (most of the time—more on that later).  

Why does prosocial spending promote feelings of happiness? 

Logically, prosocial spending doesn’t make much sense on the surface. So why do most people opt to round up their total for charity in the checkout line? Wouldn’t you want to make every effort to pinch pennies, especially if you just made a large purchase?  

As it turns out, your brain prefers the hormones it gets from generous actions over selfish ones. It all comes down to nifty brain chemistry that’s been evolving for over 1 billion years. 

“Giver’s Glow,” or the feel-good effects in your brain after a generous action, is an effect triggered by your brain’s mesolimbic pathway. (For anyone else wondering what the heck that is, it’s a part of your brain that aids in recognizing rewards). When your mesolimbic pathway is activated, your brain gets a hefty dose of chemical joy, including powerful neurotransmitters like dopamine and oxytocin. 

So sure, we hit the “round up” button hoping our dollars and cents help improve someone else’s life. And maybe we also hit because we get a pleasant burst of neurological positivity (hey, nothing wrong with finding joy through giving!) 

However, it’s more complicated than just throwing money at any good cause. You must approach prosocial giving and charitable contributions mindfully to yield authentic joy for the giver. By its very nature, prosocial spending requires you to give something up in exchange for your generosity.  

And if there’s no rhyme or reason to your choice to give, it could backfire. For example, one study found that giving to a good cause doesn’t unequivocally equal happiness. In fact, it may wind up causing more negative sentiments in the long run if done without careful thought and intention.  

The mental and emotional benefits of mindful prosocial spending 

Compassionate giving inspires joy. 

A study by Harvard Business School found that people who spend money on others report greater happiness than those who don’t. The joy of giving is coded into the human experience, as the study found that even toddlers experience a “giver’s glow” when they perform a generous deed (aww!) 

Giving alleviates stress. 

Generous acts increase blood flow to your cingulate cortex, a deep part of the brain that regulates emotions and self-reflection. This is the same part of the brain that activates during prayer or meditation. Conversely, stimulating this part of your brain “turns off” some activity in action-oriented areas of your brain—the same areas known to cause feelings of stress.  

Prosocial spending helps us feel connected. 

In addition to the personal joy of prosocial spending, it can also help us build a more interconnected world. When you give pro-socially, you’re actively creating a ripple effect that has the power to move through entire communities. Having this sense of interconnectedness to your community activates your sense of empathy and self-esteem, furthering a feeling of belonging to the world around you. 

Four questions to consider before you decide to make charitable donations

Remember that Santa and Scrooge are both a part of your inner dialogue for a reason. Yes, you’re hardwired to be generous, but you’re also intelligent and logical. You’d be in big financial trouble if you gave into every cause asking for your money! 

Plus, giving without establishing any connection or understanding of the cause doesn’t inspire the same level of joy as when you donate to a cause you passionately support.  

So to make prosocial spending work for you this holiday season, ask yourself these questions before you decide to make charitable donations: 

Do you understand how your time or money will help people? 

Most organizations have a website where you can go to learn more about how your generosity benefits others. Take time to do your research and make sure you understand the impact of your generosity. That way, you’ll feel extra good about where your money is going. 

Can you afford to make a financial contribution? 

Before donating, consider if prosocial spending is feasible for your current budget and financial wellness SMART goals. For example, if you’re following the 50/30/20 budget, prosocial spending would come out of the “wants” category.  

If prosocial spending doesn’t fit the budget, but you still feel moved to give, find a cause that benefits from volunteering or arrange to donate goods instead of money. 

Do you have a personal connection to the cause? 

Don’t donate just for the sake of donating. Think about the struggles you or a loved one has had to overcome in your life. Are people going through the same thing right now who could use your help? Connecting with a cause on an emotional level can help you give from the heart, increasing your happiness even more. 

Is this an organization you’ve chosen specifically? 

You may feel pressure to say yes every time someone asks you for a donation, but only accept if you can confidently answer yes to the questions above. Remember that you can always say, “thank you, but I’ve already donated this year,” in response to a solicitation to give.  

The Bottom Line 

At the end of the day, prosocial spending can be incredibly beneficial to you and your community. So be generous, be mindful, and enjoy the joy of giving this holiday season. You can find more tips for making charitable donations from the Better Business Bureau.  

Looking for more insight into the psychology of your spending habits? Julep is a wellness app that blends financial psychology with engaging educational experiences to help you foster a healthier relationship with money. Learn more about how Julep can help you build a healthier financial future this holiday season. 

Post Disclaimer

Julep is not a financial institution, financial advisor, or credit repair company, and does not provide credit repair services of any kind. The information provided is for general educational and reference purposes only. The information is not intended to provide legal, tax, or financial advice. We do not propose any guarantee that the information provided will repair or improve your financial profile. Consult the services of a competent licensed professional when You need financial assistance.

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