Fifth Third Securities
Smarter Ways to Give: Optimizing for Impact

We all know it’s a great idea to give charitable donations as a gift. In the U.S., 67% of households give to charity, according to The Philanthrophy Roundtable, donating an average of $2,650. Of the money donated, the most (40%) goes to religious causes, which may include relief for the poor or aid send to disaster victims. 

There are a variety of reasons to give. For one thing, it can shrink your tax burden, if you're able to take a deduction for your donation. Additionally, giving in ways that benefits others makes us happy, according to Harvard research. Another study found that you'll feel even better if you donate directly to someone you know, or in a way that builds social connection.

For many people, giving to charity is about making an impact in a meaningful way. It’s about knowing that your donation is making a difference. For those people, how do you decide where to give and how to assess the effect of your gift?

Here are a few things to consider before you pull out your checkbook.

Decide what you’re trying to achieve. You can’t make a difference until you decide what that difference is going to be. Are you looking to provide aid to people who have been devastated by a natural disaster? Are you hoping to support medical programs in another country? Do you want to help scientists research a cure for a disease? Once you pinpoint the cause that’s near to your heart, you’ll be better equipped to determine how to make the biggest dent.

"Personally, I primarily donate to local organizations where those benefiting 'help themselves' and my donation just helps them do that," says Ilene Davis from Cocoa, FL. "Beyond that, I donate to organizations that clients know and support, and to certain political advocacy groups that work to lower taxes or expose crooked politicians."

Find charities that work for that cause. Sites such as Philanthropedia, CharityWatch and CharityNavigator can help you narrow down the field of organizations that donate toward or work in a particular area. For instance, a variety of nonprofits work to raise money to cure certain cancers, from the Breast Cancer Research Foundation to the Memorial Sloan Kettering Cancer Center. And there are multiple nonprofits working for climate change, including the Sierra Club and the Environmental Defense Fund. "I use CharityNavigator to help me evaluate different charities--see how they spend their money and where it goes," says Dan Scalco, 27, who lives in Hoboken, NJ. "It's incredibly helpful." 

Do your homework on a smaller group. It may be that you’re hoping for more local impact, and you’re looking toward a local theater or civics group help you make your mark. Sharon Tewksbury-Bloom, who lives in Flagstaff, AZ, gives locally because she feels she has some knowledge of the leadership and the outcomes they've been successful at achieving in the community. "I know that there is a lot of variance in the nonprofit world with how effective organizations are, and how they are able to make best use of your money," says Tewksbury-Bloom, 33.

First, make sure they’re a registered nonprofit, to ensure that your donation is tax deductible. (The IRS has a good tool for this.) You may also want to verify that the organization has followed all state-required steps. In Michigan, for instance, both in-state and out-of-state organizations raising funds must register with the state government.

Then do an Internet search to check for reports of fraud or other concerns about the organization. Get to know them: Do they have events? How many people attend? Do they seem to be making a difference? "Generally, it's enough to Google the charity," says Michael Montgomery, a nonprofit management consultant and educator in Huntington Woods, MI. "Journalists love to do nonprofit exposés. If they had a scandal or ever lost major funding because of ineffectiveness, someone will have written about it."

Do your homework on larger groups, too. You may think you’re giving money to a top-of-the-line charity, one with name recognition and a great reputation. But even well-respected national charities have been blasted in the past few years for spending too much on overhead expenses and not enough on people in need. Those same sites above offer a great deal of information on charities and how they’re using their money, so familiarize yourself with an organization and make sure you’re comfortable with how they’re doing business.

"It's smart to look and see the percentage breakdown of where donations are spent," says Sage Singleton, safety expert with home security company SafeWise. "Try to donate to a nonprofit that gives more than 65% of fundraising dollars to the actual cause. This information should be available online, and if it's not, that's a red flag."

Find out what’s most needed. Sometimes, after a crisis, people send truckloads of supplies to people in impacted areas. But money may be the most useful donation—responders can use it for immediate needs such as food and water. Or it could be that an organization is most in need of your time—spent volunteering, spent making phone calls, or spent in a hard-hit area offering assistance. 

"Follow your instinct, and don't be shy to reach out to the charity to ask probing questions," says Joanne Sonenshine, a nonprofit employee for many years and current owner of consulting firm Connective Impact. "If the organization is of high quality, it should be able to respond to any questions you have in a timely manner. Finally, reach out to your social networks and ask for advice from friends, family and colleagues. Word of mouth goes a long way when it comes to reputation."

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