Meaning of daan (दान) - to bestow ,to dispose ,to donate ,to endow.See here
The Daan(दान) should only be made with the money leftover after fullfilling the requirements of family. Daan should not result hardship to donars family or loss of livelyhood.In general only those who have surplus wealth are required to give.
Scriptures lay down varying proportion of one's income (ranging from 10% to 40%) to give away in daan.
Skanda Puran(स्कंद पुराण) - According to Skanda puran one should 10% of one's justly earned income on good deeds or works of pubilc benifit.
Bhagwat puran(भागवत पुराण) - At one stage, when "Sukhracharya" advices king "Bali" against giving all his wealth away. He quotes learned people to recommend dividing one's fund into five equal parts.
1) One part should be used for Dharma (daan).
2) Second for Yash (public works ,which brings fame to oneself).
3) Third should be re-invested for generating more wealth.
4) Forth for "Kaam"(काम) or material enjoyment.
5) Fifth for one's family and friends.See Here
Importance of Charity (Danam)
आदानां दोषेण भवेद्दारिद्रम। दारिद्र्य दोषेण करोति पापं ।।
पापदावस्यां नरकं प्रयान्ति। पुनर दरिद्रो पुनरेव: पापी ।।
“Adana Doshena Bhaveddaridram Daridraya Doshena Karothi papam
Papadavasyam Narakam Prayathi Punar Dadidro Punareva Papi.”
Meaning - Great men think that poverty comes to man as a result of his
miserly deeds of his past birth. A man should,as sastras say, donate
some of his earning to the poor. He should cultivate the habit of
doing charitable deeds. Otherwise in his next birth he will again be
born as a poor man who will be forced to do sinful deeds and as a
result of which he will be placed Narakam [Hell] and after receiving
punishment in Hell, he will be born again as a poor man:
दारिद्रय:कुतं दानं। शून्य: लिंगस्च पूजनं।। अन्धा प्रेत: संस्कारं।
अश्वमेध: समं विदुहु।।
“Daridraya Krutam Danam Soonya Limgascha poojanam Anadha Pretha
Samskaram Aswamedha samam viduhu.’’
Meaning - Helping the poor with money, doing ‘Archana’/’pooja’
[worship] to the Shiva Lingam of a dilapidated temple, doing funeral
rites to the corpse of an orphan are equal to doing Aswamedha Yagam.