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Charitable Giving: Make it Effective

By David J. Haas CFP®
December 14, 2020

Last week I wrote about tax-efficient ways to donate to charities in part 1 of this article. This week I would like to tackle how to make your donations as effective as possible.

Watch Out!

Unfortunately, the first thing I need to talk about in this season of giving is fraud. There is definitely outright fraud among non-profits. Here are some tips to help guard against fraud.

  • Watch out for sound-alike charities – These are charities that sound similar to a well-known above-board charity. For instance, a few years ago some fraudsters got in trouble collecting money for the Wounded Warrior Foundation. They picked a name easily confused with the highly-rated Wounded Warrior Project. But their charity only enriched themselves and no money ended up going to injured soldiers. Even if you think you know which charity you are donating to, verify the name using Charity Navigator, GuideStar, or Charity Watch, organizations that rate charities.
  • Never give over the phone – I want my charitable giving decisions to be very deliberate. I always tell callers to send me information in the mail and I refuse to make a commitment on the phone. Quite frankly with the amount of fraudulent phone calls of all types, I pretty much don’t answer calls from those who I don’t know.
  • Don’t give to paid fundraisers – Many of those calls are made by paid fundraisers. These are companies that can solicit for charities, but the paid fundraiser takes a cut from any amount raised. That cut can often be huge and there are cases where the charity itself gets very little of the money. This is another reason to never give over the phone.
  • Giving to individuals is not tax-deductible – Is that GoFundMe page tugging at your heartstrings? Keep in mind that giving money to individuals is a gift and not a charitable donation. That story on the webpage or on social media may or may not be true. As heart wrenching as these stories are, I would be very cautious. Instead donate to a reputable charity which does work in the area where this person is asking for money. You can even message the person that you made a donation on their behalf and they should take advantage of the charity’s programs.

Charities to Consider

 So here are a few suggestions I have in different areas of giving.

  • Poverty and food insecurity in the USA – I always like to donate locally if possible. Local food banks and pantries do a great job in their services and have many more clients than they used to. Here in Bergen County, NJ, I give to the Center for Food Action and I also donate to the Community Food Bank of New Jersey. If you are looking for a national charity, I suggest donating to Feeding America, an umbrella organization of food banks.
  • International Poverty and Relief – There are many organizations working internationally, but not all of them are great. I like Oxfam America and Doctors without Borders. I also like GlobalGiving Foundation because they work with local non-profits on the ground and spend a lot of time vetting the projects and groups they work with. You can choose the exact program that your money is going towards. I feel that its more likely my donation is going towards effective work when it funds local feet on the ground.
  • Education – You can give to your Alma Mater or a different college or university. This year I started donating to a charity called OneGoal. They work with high school students who are the first in their families to go to college to do well in both high school and college. Education is one of the best ways for people to get out of poverty and this seemed like an interesting way to accomplish it. Another possibility is to donate to a scholarship fund. There are often local foundations which sponsor scholarships in specific towns or regions. If you want to create your own scholarship, look for a community foundation that works in your area.
  • The Arts – Artists are often under-appreciated and under-paid. You can make a big impact with you gift to local arts organizations. Your best bet is to give in the places where you enjoy the arts. Do you enjoy the concerts given by the local symphony? Then give there. Do you enjoy occasional trips to an art museum? Then that could be a good choice. Music, performance, and visual arts have been hard-hit by the pandemic, since many have had to temporarily close or curtail operations. They could really use your monetary donations.
  • Veterans – Here you need to be very careful. There are many veteran charities which are basically frauds. That’s because it’s a cause almost everyone wants to donate to. I get calls all the time for veteran organizations I’ve never heard of. Here are a few I think are the best: Wounded Warrior Project, Homes for our Troops, and Support the Enlisted Project (STEP). Be wary and research any charity in this space before you give.
  • Emergency Services – This is another area rife with fraud. Again, avoid giving when people call you about police charities. Many of them are not real charities and very little of the money goes to any real programs. Its safest to find out which programs actually work in your town and give directly to those. If you have a volunteer ambulance or firefighter service, they almost all have charities associated with them. Paid police and firefighters have unions with various funds which they use to benefit the community.
  • Religious Institutions and Charities – I have given to religious charities and many of them do outstanding work. But this is also an area that I would be a bit more cautious about because there is some fraud out there. You may be Christian, Buddhist, Muslim, or Jewish and the charity seems to support your values, but you should do more homework. Verify how much of your donations are really going to the cause you care about. One of the charity vetting tools I mentioned above should have detailed information. An example is that the Jewish charity Dorot does wonderful work. FEGS Health & Human Services, at one time one of the largest Jewish charities in the country dissolved in scandal.

Charitable giving is very rewarding to the donor and I hope you join me in philanthropy. Following the rules of thumb in this article and being deliberate about your donations is the best way to ensure your money is doing the most good possible. Best wishes for a happy holiday season!

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