With an estimated 2.3 million nonprofit organizations in the United States, according to the Urban Institute, there is no shortage of worthy causes to support. Use these four tips to help you become an informed donor and move you toward your philanthropic goals.
1. Decide How You Want to Contribute
Consider charities that support causes you believe in, and then decide how you want your charitable donation to contribute to the cause. "If you want to support a cancer organization, for example, what do you want to support specifically? Advocacy? Research?" says Sandra Miniutti, Vice President of Marketing and CFO, Charity Navigator. "Determine what you want to fund, and look for charities that do that work."
2. Do Your Homework on Potential Charities
When researching a charity, focus on these three aspects of the organization to finalize your decision:
- Financial health: If you are considering a large organization, aim for one that allocates at least 75 percent of money raised to the program and no more than 25 percent of funds to administrative tasks, Miniutti suggests.
- Accountability and transparency: Look at the policies and procedures in place to ensure the organization practices ethical behavior. Also, research charity board members. "In some cases, family affiliations on a board can pose problems, so make sure there is a diverse and independent board," Miniutti says.
- Results: "It's important to look beyond the heartwarming story that inspired you to support the charity in the first place," Miniutti says. Check the organization's website regularly, or volunteer to see firsthand the impact they have in the community.
- Additional research: Make sure the charity you choose won't sell your information to other organizations. You might even consider donating anonymously if this is a major concern for you.
3. Be Discerning When it Comes to Charities
It's always risky to donate money to someone over the phone. In most of those cases, you can't verify whether the charity is legitimate. "Sometimes, telemarketers calling on behalf of charities are for-profit businesses that keep part of your donation," Miniutti says. Instead, consider volunteering with charities, attending webinars, reading blogs, and following organizations on social media to learn about their impact and the challenges they face.
4. Find out if Your Charity Is a 501c3
If you itemize tax deductions, in-kind charitable donations can actually help reduce your tax burden. But if you want to take your donation as a deduction for tax purposes, the organization needs to be a 501c3, or public, charity. If an organization isn't a 501c3, your gift may not be deductible, so ask before you donate. Websites like Charity Navigator and GuideStar can also provide this information.
When philanthropy is at its best, donors and charities are partners. "Reputable charities welcome questions," Miniutti says. "Just do your homework."
