Tips for Charitable Giving

Giving is something that is very innate in human beings. Giving our time, money, and emotions make us feel good because we went out of our way to help someone in need or make the world a better place. Around 65% of American households give to charity and in 2011 Americans gave over $298 billion to charitable enterprises. This large amount of cash flowing freely out of the pockets of America’s individuals and businesses has also created a market of not so charitable organizations working to get their share of charitable gifts. While charitable giving is important to many Americans, there are some things that individuals should keep in mind when next looking to give.

One of the most important things to keep in mind is to not give emotionally. This sounds counter intuitive because giving charitably is often an emotional process. By giving we feel positively about ourselves. Giving from emotion however, is problematic if individuals really want to get the most social “return” on their time and money. Research is the key to maximizing this social return. First, an individual should make sure that the organization he or she is interested in giving to has similar values. All charities have an obligation to share information with interested donors including their mission statement, Board of Directors, values, results or accomplishments in previous years. The nature of the work that is performed, where it is done, and whether their goals are more short term relief or long term change are all things to consider. Many of these facts can easily be found on the internet and are worth taking a few minutes to search them out. Individuals should also be sure to be careful with organizations which names just sound familiar. Often new organizations or scams will use similar names as well-known organizations to increase their revenue.

Another important component of researching possible organizations to give money to is their efficiency. Efficiency, commonly referred to as a program ratio, is the measure of how many dollars goes directly to programs and ventures tied to the organizations mission statement or goals. Believe it or not, but many non-profits spend a ton of money and man power solely on bringing in more money. Giving to an efficient non-profit is important because it means that more of donated money is actually affecting the cause that donors are interesting in helping. Sites like guidestar.org and charitynavigator.org provide resources that are useful for discovering how efficient a non-profit is. Typically an organization that uses at least 70% of its resources towards its programs is a legitimate group, although higher efficiency rates are common. It is also useful for individuals to keep in mind that not all types of charitable work can result in the same efficiency levels. Non-profits should be compared to peers in similar types of work for a better representation of how efficient they really are.

There are hundreds of thousands of charities out there, which makes it difficult to narrow down which one or ones are best to give to. This can lead to individuals wanting to give to many charities in an attempt to spread their generosity to many different causes and programs. This is actually a very inefficient way to give if an individual is concerned with how their money is effecting change in the world around them. This is because when an individual gives to a charity that charity begins spending money on that donor. This money is spent in order to retain the donor and try to convince them to give even more next time they are donating money. This is problematic if an individual gives a small amount of money to many charities because then there will be many charities wasting time and money to retain them in the future. While this is not the donor’s fault, it is how the system works. Giving to only a few very important charities is actually a much more efficient way to give money. In addition to this, if an organization reaches out to an individual to give money a strong no is much better than a maybe. Again, a maybe will lead that organization to continue to spend money and time recruiting the possible donor, even if it may just have been that the individual was too polite to directly say no. Ways like these lead to individuals unknowingly wasting much of the time and money of the organizations that they mean to help.

Giving money to non-profits is a great way for people to create positive change in their communities and world around them. Individuals should be sure that the money they give away is going to whom and to what they intend. Using the internet wisely and taking the time to do research can prevent individuals from making mistakes when it comes to being charitable with their money.

Sources: nptrust.org; www.today.com ;  www.charitynavigator.org; www.charitywatch.org

Stephen Padgett

Stephen Padgett

Stephen Padgett is a current junior at the University of North Carolina at Chapel Hill. He is working toward a BA in Economics and Political Science and plans on graduating early in December of 2012. Although he does not know what he wants to do for his career, he is looking forward to an opportunity with Credit Suisse’s Operations Team this summer in Raleigh.

Financially Stephen grew up in a family that preached saving and living below your means. That, in part, translated to his interest in Economics, especially how economics can affect individuals’ financial lives. Through his financial markets class in the fall of 2011, he furthered this interest by analyzing macroeconomic events. Stephen believes that finance, personal finance in particular, is a subject severely left out when it comes to public schooling in this country, and it is a problem that has manifested itself and contributed to many of the problems seen today. He also believes that education is the key to improvement and hopes that through his writings he will be able help people learn about finance, macroeconomics, and how to be financially savvy for the future.

In his free time Stephen enjoys playing and watching sports, wakeboarding, sailing, and country music. At UNC he has participated in Strive for College, UNC Dance Marathon, and UNC Relay for Life.
Stephen Padgett

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