Top Tips for Effective Charitable Giving
Americans gave $471 billion to charity in 2020, nearly 80% by individuals (and the remainder from corporations and foundations). On a per-capita basis, that’s seven times as much as Europeans, and twice as much as Canadians give.
It’s not necessarily that Americans are better people; charitable giving is woven into the fabric of our society and acts as a counterbalance to our limited government compared with countries that have broader government-provided social services
While the reasons vary by individual, the top ones are:
All these reasons have a common foundation: we give because it makes us feel good. Research has found that giving to charity increases happiness and an overall sense of well-being for the giver. Some studies have found that giving money to benefit others increases the giver’s happiness more than spending money on themselves. It just feels good to give.
Yet not all charitable giving is created equal. In my experience working with wealthy families, I’ve found that charitable giving that is strategic and planned is more satisfying for the donor than reactive or unorganized giving.
I was reminded of this while doing my taxes this year. I saw that I had given to many charities with which I have no relationship and about which I know little. These gifts were in response to solicitations. While none of them was large, taken together, they added up to a tidy amount. I would have felt better about giving that money to a charity I know and care about. I have clients who’ve expressed the same sentiment.
How can we be more strategic and effective with our giving so we feel better about it?
Start by defining your top-down strategy, how much you want to give to charity each year, and roughly which charities or causes you will support. For example, you may decide that you want to donate about $40,000 and that you’d like 25% to go towards education, 40% to environmental causes, 15% to support the arts, and 20% to various charities that you’ll decide about as the case arises (or solicitations arrive in the mail).
As you formulate your strategy, think about your values and passions and how your giving can further them. Which problems do you want to help solve?
Once you’ve decided how much you’d like to give and how you want to allocate it, you next need to select some charities.
First, review the charities to which you usually give. Are there any that aren’t solving problems you care about? Are you giving to some because you’ve given in the past? It’s okay to stop giving to charities that you don’t connect with strategically or emotionally. And don’t feel bad about not giving to organizations that solicit you.
There are several ways to find charitable organizations that line up with your top-down strategy:
Third, monitor and evaluate your giving. A key to feeling good about your giving is knowing if it’s effective.
Charitable giving is personal — there is no one right way to do it. The most important things are that you feel good about your giving and you are making a difference in the world.
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