One of the things stopping people from donating a substantial part of their income to charity is the risk of a future financial downfall, which can be anything from unemployment to illness. Even in a rich country with a solid social safety net, the idea of having no financial buffer at all seems daunting. However, if effective altruists precommitted to helping other effective altruists in need, they could all donate more money, as the risk would be spread.
This sounds a lot like insurance, and effective altruists could indeed insure themselves against a myriad of risks. Unfortunately, insurers will reject claims whenever possible, some risks cannot be insured, and insurance requires monthly payment, which requires a stable income. In other words, insurance is no replacement for a personal financial buffer. Insurance is useful to mitigate specific high-cost risks, but that's it.
(Additionally, insurance introduces the overhead of an insurance company. When I asked for a ballpark estimate at the insurer I interned at, I was told that at most one-third of all premium money is put back into payment of legitimate claims.)
I propose an intermediary charity that acts as an emergency fund. If a donor spends $100 through this charity, this intermediary charity directly forwards $80 of incoming donations to charities of the donor's choice. The remaining $20 is put in an emergency fund. In situations where the donor would otherwise make use of their financial buffer, they can take up to $95 from the emergency fund.
Recoupments would not need to be subjected to the same thorough vetting as insurance claims, since donors cannot recoup as much as they originally spent, so there is little opportunity for fraud.
The example above works under the assumption that, on average, donors need 20% of their donations back. It might make sense to create different funds for donors with different risk profiles: if a subset of donors think there's a 50% chance they'd need donated money back, they could donate to a fund which puts half of their donation in the emergency fund.
I would not recommend relying solely on the emergency fund as a replacement for a personal financial buffer, because it can be drained in times of national and global crisis. However, I believe that the mere existence of the fund will move people to donate more, not just by donating part of their emergency fund, but also because it makes donations less final. When contemplating giving away money, some people always worry they might need the money later, even if they are in good shape financially. If they knew they would very likely be able to get the money back, donating would be less of a hurdle psychologically.
Because the idea of an emergency fund for donors is so simple, I'd say there's a good chance this has already been investigated. If anyone knows of existing literature, I'd be happy to hear about it. In particular, I'm interested in the following questions:
- Should donors be required to provide reasoning for recouping their donation? My gut says no, unless something akin to a bank run occurs. They should probably only have to tick a box that says "An emergency occurred! Because of this, I really need the money."
- Should the right to recoup be limited to X years? Or should there be a lifetime guarantee? Should the right to recoup be inheritable? This would make donating more attractive for those worried about their offspring, but it makes the operation more complex.
- If recoupments occur sparingly, as I'd expect, where should the remaining funds go?
- How big is the risk that the fund will be used in illicit ways, such as tax evasion, despite the fact that donors cannot claim more than they spent?
- What should happen if the fund is drained?