6 Mistakes to Avoid When Giving to Charity
Here's how to make your contributions go further on Giving Tuesday and all year long
You’ve probably had it with all the promotions for Black Friday and Cyber Monday; I know I have. But as I help you avoid making big mistakes with your charitable giving for 2012, bear with me as I urge you to take advantage of Giving Tuesday. Or more precisely: #GivingTuesday. It’s happening on Tuesday, Nov. 27.
If you haven’t heard of #GivingTuesday, don’t feel embarrassed. I hadn’t until a week ago, when I began my annual review of charities to see which ones I’d target for my year-end contributions.
The purpose of #GivingTuesday, a new semi-holiday, is to get Americans to celebrate and support charities in a season that often seems exclusively about spending money.
#GivingTuesday is the brainchild of New York’s 92 Street Y, a nonprofit that has enlisted the support of more than 800 nonprofit, corporate and social-media partners, from the United Way to Microsoft to Mashable. #GivingTuesday says on its website: “We have a day for giving thanks. We have two for getting deals. Wouldn’t it be great to have a day for giving back?”
We’re not really supposed to limit our charitable giving and volunteering to #GivingTuesday, of course. But, ideally, the day will serve as a jumpstart for Americans to give more and give smarter.
In that spirit, I’d like to offer tips on how to make the most of your donation dollars by avoiding these six common donor mistakes:
1. Failing to develop a proactive donation strategy. Many of us tend to make our charitable contributions by responding reactively to requests, often after a natural disaster, like Hurricane Sandy. Helping those who are suddenly in need is admirable. The problem is that when you give this way, you may wind up exhausting the money you can afford to donate without giving to the types of causes you care about passionately.
You’d be better off if you took the time to identify those causes, looked for worthy charities that support them, then financed those groups year after year.
2. Neglecting to research a charity. Many of us give to particular service groups because they’ve been recommended by friends – especially nowadays, as people increasingly spread the word about them on social media sites, like Facebook. But as a new Better Business Bureau consumer alert on charitable giving notes: “Even good friends may not have fully researched the charities they endorse. So don’t just take their word for it.”
Just because a group’s name includes a cause that you back doesn’t mean it’s truly the most appropriate one for you. For instance, there are many charities devoted to combating cancer, but each has a different mission and strategy. Do you want to give to an umbrella group or one whose dollars are targeted to a particular type of research? Or perhaps one that provides mammograms to at-risk women in your community.
If a charity you’re considering is local, “go volunteer and see first hand what it has accomplished,” says Sandra Miniutti, vice president of marketing and chief financial officer of Charity Navigator, a nonprofit charity rater.
You should also check to see that the nonprofit is managing its money wisely. As a rule, at least 75 percent of its money should go towards its mission, with the rest spent on fundraising and administration.
But the BBB’s alert says you shouldn’t assume that low overhead is all that matters. “A charity with impressive financial ratios could have other significant problems such as insufficient transparency, inadequate board activity and inaccurate appeals,” the BBB warns.
Fortunately, online tools from charity raters can help you do your research, as I have previously written on Next Avenue, including ones from Charity Navigator, the Better Business Bureau’s National Charity Report Index, Guidestar and the American Institute of Philanthropy’s Charity Watch.
The Christian Science Monitor just published an excellent chart showing head-to-head ratings of the nation's 50 largest charities. The chart demonstrates why you shouldn’t rely on just one rater. It shows that Feed the Children, the nation’s 35 largest charity, gets Charity Navigator’s highest score of four stars, but CharityWatch gives the relief and development group a grade of F.
3. Succumbing to high-pressure emotional pitches. Be extremely cautious about giving to a telemarketer or door-to-door solicitor, especially if you’re not familiar with the person’s group. Otherwise, after you hand over your credit card number, you become an identity theft victim.
Miniutti has another reason not to donate over the phone: Many charity telemarketers are employed by for-profit companies that can often keep a large portion (in some cases, all) of the dollars they collect. Sending your contribution directly by mail or online will cut out the middleman and help ensure that your money will reach the charity.
4. Mistaking a charity’s identity. There are thousands of charities and many have similar names, but different missions and track records.
Consider the sound-alikes Children’s Charity Fund and Children’s Defense Fund. Charity Navigator gives Children’s Charity Fund zero stars (for spending 85 percent of its expenses on fundraising, not having independent voting members on its board and failing to make its tax return public, among other things), but bestows three stars to Children’s Defense Fund (the group spends just 6 percent of its expenses on fundraising, has independent board members and makes its tax return public).
5. Assuming a charity wants any item you donate. This is a particular problem after natural disasters like Hurricane Sandy, when appeals go out for clothing, blankets and food. I know that after Sandy hit, my email inbox was flooded with pleas from neighbors to drop off unwanted coats at a nearby school.
But both BBB and Charity Navigator say such donations are not always practical or efficient. Few groups are set up to receive goods, much less organize and distribute them in a disaster area. Similarly, new charities that spring up to deal with a local disaster may not have the infrastructure to accept and distribute items.
If you really want to be useful after a disaster, Charity Navigator suggests you select an existing organization with a proven track record dealing with similar crises that is already set up in the geographic region you want to help.
6. Overdiversifying your donation dollars. Diversification may be a smart investing strategy, but spreading your money among many philanthropic endeavors isn’t a great idea, Minuitti says. For one thing, it’ll lead to an avalanche of appeals filling your mailbox.
More important, the processing expenses for the gifts can severely reduce the chance that the groups can effect substantive change with your donations. That's especially true if you give through social-media sites, since they often set low donation suggestions of $5 to $50, but may charge processing fees on those contributions, according to a MarketWatch article by Kelli B. Grant.
Instead, select a small number of well-run charities engaged in causes you care about then “stick with them over the long term,” Miniutti says. “You’ll get a bigger bang for your bucks.”