American charitable giving is the largest in the world, exceeding $300 billion per year given to over 1 million charities.
Like you, my mailbox overflows this time of year with solicitations from many organizations supporting worthy causes; locally, nationally, and internationally.
Deciding how much to give and to whom is challenging at best. Many of us give because we are loyal, enjoying our symphony, supporting our religious organizations, supporting our alma maters or helping our communities. Emotional satisfaction is not to be undervalued.
Yet, according to a 2010 study conducted by the San-Francisco based Hope Consulting, two thirds of all donors report doing no research at all related to their charitable giving. Giving from the heart is a worthy reason, but I encourage you to spend a little time on Charity Navigator, GuideStar or Wise Giving Alliance to see how the non-profit is rated, how much of your donation will actually go towards fund raising vs. programs, etc.
Here are a few additional ideas to make your charitable giving more impactful:
Rule #1: Give on your schedule, not the charity’s. There are many ways to reap the tax benefits of end of the year charitable giving without forcing yourself to put a Dec. 31 deadline on your calendar. One easy way is set up a Donor Advised Fund at your local community Foundation or at many Custodians like Schwab or Vanguard. DAF’s allow you to reap the tax benefits in the year of your gift but pass the cash to the charity on your own schedule in future years. You can use appreciated assets (stocks, mutual funds, etc.) and avoid paying tax on those gains. (Consult with your financial planner or CPA for specifics).
Rule #2: Impact giving: What impact will your donation make? Will it be a drop of water in the ocean or will it really make a significant difference where you want it to? Keep in mind that over 85 percent of donations go to churches, alma maters, civic organization and alike. Less than 15 percent go to human service charities that provide food, shelter, youth support, disaster relief, and other services. Where can your hard-earned dollars do the most good?
Rule #3: Don’t micro-manage. Telling a charitable organization that you want your gift to go to a specific area just handcuffs the non-profit. You’ve picked a great charity so trust them to solve the problem.
Rule #4: Help the charity help themselves. Ask the charity how they prefer their donation to be given. Challenge grants, where the charity can leverage your donation with matching grants, can sometimes generate two or three times the dollars than a straight donation.
Rule #5: Focus. Writing $50 checks may feel good, but giving a few organizations $1,000 each may do much more good. Fund-raising is a major cost to charities and larger gifts are more efficient for them to receive.
Rule #6: Plan. Develop a personal giving plan. Many people give a percentage of their earned income each year to charity. Whether it is a percentage or a flat dollar amount, making a commitment at the beginning of the year will help you with your decisions. Start with the causes you want to support (arts, education, etc.), then narrow it down to location (community, national, international, etc.) and find the best charity whose mission that meets these goals.