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How To Give Smarter & Make Your Donations Worth It
It is more blessed to give than to receive. But like all things financial, you want to be strategic about your giving too.
No doubt when you make a sacrificial gift to a charity, it makes you feel great, but smart giving goes beyond that and does good. Here's how to make the most of your donations.
You know where your heart lies. What's most important to you, the homeless, children, education, hunger? Find organizations and events that pull your heartstrings. However, don't give solely based on emotion. Know whom you're giving to.
How to check out a charity
Do your research. Tap resources like Charity Navigator, Candid, the Better Business Bureau's WISE Giving Alliance, Charity Watch, among others that provide ratings and detailed information about charities. The Federal Trade Commission has a checklist of things to do before giving to a charity. The IRS's Tax Exempt Organization Search tool tells you if your donation would be tax deductible. You can find your state charity regulator at nasconet.org.
"I've found Charity Navigator does a great job of vetting charities and they create a 'score' for each charity to make it easy to know if they are legitimate," says Misha Mikhaylov, a chartered financial analyst and CEO of Llama Loan.
What criteria count in sizing up an organization? Look for charities that clearly communicate their mission and prioritize a substantial portion of their budget for direct program activities. "You should be able to clearly find what percent of your donation goes toward program activities. The higher this percentage, the more of your money gets put to good use. This information should be clearly stated somewhere on their website," says Mikhaylov.
A common benchmark is that at least 75% of the organization's expenses should go to their programs and services, adds Taylor Kovar, CEO of Kovar Wealth Management.
Avoid scams
You don't want to get taken while you're giving. There are red flags that an organization may not be legitimate.
Even if your charitable donation is intended to help a foreign country, no legit charity will ask you to send money to a foreign bank account. Be wary, too, of charities asking for a wired cash transaction. Cash is easy to steal and hard to track.
If a phone or in-person solicitor seems pushy or demands an immediate decision, be suspicious. Question the person on the charity's mission, the way it spends contributions, and ask for proof that the donation is tax-deductible. If they fumble with answers, it's a good clue that perhaps you should keep your money in your pocket.
The FTC recommends donating using a credit card or check and keeping a record of all donations. Review your bank statements to be sure you were charged the amount you intended and that you don't see recurring donations. Before giving online, make sure you know who is receiving your money.
Give wisely
Once you're confident that the organization you want to contribute to is on the up and up, how much should you give? That's a question only you can answer, based on your financial priorities and budget, but experts say 3-10% of income is common.
From there, keep these tips in mind:
Keep records
Donations to qualified charitable organizations may be tax deductible. Keep records of your donations and consult with a tax professional to find out if they are deductible.
Donate directly
Kovar offers this advice: "Donate directly to the charity to avoid fees that might be taken out by third-party platforms."
See if you can find a way to match your donations
Also check to see if your employer offers a matching gift program. "This can double the impact of your donation," says Kovar.
Get specific
Consider donating to a specific program, one-off event, or initiative rather than providing a general donation to an organization. For example, says North, "If you're an animal lover, don't just give to the national ASPCA; give to a rescue program in your town or county. If you want to fund cancer research, give to a specific cancer research program such as colon cancer, if that matters to you."
Donate from your IRA (if applicable)
Chris Urban, founder of Discovery Wealth Planning, points out that Qualified Charitable Distributions (QCD's) are a great way for individuals 70½ and older to give tax-free donations directly from their IRA to charity. He says, "If you need to take required minimum distributions (RMDs) from your account(s), a QCD could satisfy some or all your requirement. They do not count as income when you file your tax return. The 2024 QCD limit is $105,000. This amount is indexed for inflation and thus, will likely change annually."
Pair your time with dollars
If you not only give money but your time, you can see the impact your dollars have because you've served as a volunteer. You end up knowing more about the organization and its programs and administration. "Seeing the direct impact connects you more with the good work and increases satisfaction," says North.
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