According to the teachings of Islam, being charitable is one of the highest virtues and is considered a means of cleansing oneself spiritually and materially.
One of the essential 'pillars' of Islam is zakat. It is compulsory for those who meet a prescribed annual surplus in their income. With zakat, Muslims are asked to give 2.5% to the poor and needy. This is a very practical and simple measure that aims to re-distribute wealth. But beyond this, Islam encourages Muslims to give charity voluntarily and abundantly.
There is dignity in giving and receiving charity. Just as in the Biblical tradition, Muhammad taught that one who gives should aspire to "giving with his right hand so the left hand should not know" (Muhammad). He also encouraged the one receiving the charity to become self-reliant, to seek ethical earning and independent livelihood and not depend on others, "Giving is better than receiving." (Muhammad).
Muslims believe that giving charity does not really diminish wealth. In fact, everything one gives is considered an investment for the next life. Islam does not discourage people from earning well or becoming rich. However, the teachings remind us that our wealth should never dominate us but should be seen as a trust, to be spent positively.
Importantly, one does not even have to be rich to be charitable. On many occasions Muhammad reminded people that, "a good word is charity,", "a smile is charity," and "picking up rubbish or removing obstacles from the path is charity". Young and old, rich and poor, the butcher, the baker or the candlestick maker are all encouraged to join in the practice of sharing and caring.