Between 70-90 percent of American households donate to charities, giving more than $300 billion every year. These donations go to more than 1 million public charities listed with The National Center for Charitable Statistics. With all those choices, it’s easy to feel overwhelmed when deciding who deserves your hard-earned money as a donation.
On top of that, many people think that to really make a difference in the world (or state, or even city) they must make a huge donation—they think that true philanthropy is only for the wealthy or for large corporations. But the fact is, almost everyone can become an “everyday philanthropist” and provide much-needed funding to deserving organizations through just a little research and planning.
Before you hand over a donation to the next group that asks, consider these three steps to maximize your impact and reap the positive feelings associated with giving:
Think about what matters to you, because giving is about the heart. Identify what you value most and then select a category that supports those values. For example, if you value creativity, consider supporting arts organizations. If you prioritize hard work, think about charities that help people find jobs or improve their skills. Choosing a category will help you narrow your search for a deserving organization and will ensure that you select a cause you truly believe in
It’s important to do your research and learn how an organization will use any money you donate. GuideStar, a free online service, is a great place to start. You can search by keyword and filter by location to find an organization that fits within your selected category. You can also review mission statements, contact information and financial details to help you evaluate the organization. Look for organizations with green checkmarks next to “Registered with IRS” to ensure legitimacy.
Once you verify an organization’s legitimacy, you should explore its website to review its performance. Look at tax returns and other financial data to see how the organization spends its funds. Keep in mind that all charities require some level of overhead, and many will have funds dedicated to fundraising and marketing. You should evaluate whether these expenses seem to be in line with the overall donations and amount spent toward achieving a charitable purpose. Although there is no “right” percentage of overhead expense, the number can show you how effective the charity may be.
Researching organizations helps ensure that your donation is in good hands, but it’s still important to watch for signs of a scam. If an organization approaches you and uses high-pressure tactics to make you donate immediately, asks for cash or wire donations or thanks you for a pledge you don’t remember making, you should investigate further.
Evaluating organizations can help you determine how much you want to donate. Many organizations calculate and publicize what services they can provide based on popular donation amounts. For example, organizations striving to end hunger can typically tell you how many people they will feed with each dollar they receive. Consider this information in tandem with your personal budget.
In some of the country’s most generous areas, people donate between 6-9 percent of their discretionary income.
No matter how much you can afford to give, remember that even a small donation can accumulate to help an organization toward its goal.
After deciding on an amount to give, commit to keeping a record of your donations. Recordkeeping will help you track your impact over time and will be useful during tax season. Remember that “tax deductible” means you can deduct your donations on your federal income tax return, while “tax exempt” means the organization is exempt from paying taxes.
If a financial donation isn’t feasible for you—or if you want to augment your donation—ask the organization if they need volunteers. Many organizations rely on volunteers, and volunteering is a great way to see firsthand how an organization operates.
Ken Spruill is vice president and manager, private foundation management services of Hawthorn, PNC Family Wealth.
Giving to organizations that are supportive of the values you hope to perpetuate in the world is admirable. Ensuring that your dollars actually go to support those values is wise.
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