Giving money to the needy has been shown to create a ripple effect and ends up helping people beyond those that received the money .
By giving money to a person in need, you may be indirectly helping more than just them. The person that you donate to will likely spend their money locally, thus providing support to smaller businesses that may even be struggling as well. The more money that a business makes, the more they are able to pay their workers. This is known as the ripple effect - when the influence of one action continues to spread and pervade throughout a group or community. According to a study conducted by the University of California, Berkeley, cash aid given to impoverished families resulted in a net growth of the economic activity in the area - $2.60 worth of increased activity for every dollar given to the families. Giving money to a homeless person could give them the boost they need to improve their living situation, which could mean a new job and housing. A new job would mean that the person is, again, helping local businesses by being available to work. This person may even end up becoming a volunteer and helping other homeless people who are in the same place that they once were. The many ways in which a simple direct donation could create a positive effect are endless; by giving money to a homeless person, you are not only supporting that person but the entire surrounding community.
Most people who directly donate money to homeless people don't give any more than a few dollars at a time if that. Although more successful panhandlers can make up to $100 in a single day, the average is much lower. Considering that the families participating in the UC Berkeley study were each given large sums of money that, in total, turned into 17% of the total local income, it is difficult to say that this study could compare to the earnings that the average homeless person makes. Therefore, the ripple effect probably would not really apply to someone who gives $2 to a homeless individual on the street.