’Tis the season of giving: of gifts, of parties and of donations to charities. Some 40 percent of all individual charitable donations are made in December.
For many charities – such as Teach for America, which received 80.5 percent of all individual donations for 2012 in December, and Save the Children, which raked in 68.6 percent of donations in that same month – end-of-year fundraising is the difference between a successful year and financial hard times.
The American charitable sector is the largest in the world, with Americans contributing more than $300 billion a year in money plus $260 billion in volunteer time. With 1.1 million charities to choose from, it’s not easy to decide where all that money should go. Yet all the data show that American donors are just not interested in putting in much time or effort into making those decisions.
The fact that you’re reading this piece indicates that you don’t fall into that two-thirds of no-research donors. And of course, it’s easy to criticize the giving habits of American donors but much harder to provide specific, constructive advice – that’s why most holiday-giving advice columns are so toothless and generic. We’re hoping that this one proves to be more useful.
Rule No. 1: Go for a high-impact donation. This might sound like it’s from the “No Kidding” Academy of Donor Advice. But in fact only a small subset of donors – representing 16 percent of all donors and 12 percent of all donations – define themselves as “high impact,” supporting the charities that create the most social good.
Rule No. 2: Don’t get obsessed with efficiency. The most pervasive – and most destructive – myth around giving is that “efficiency” is the best measurement of charities, and that overhead spending should be kept to an absolute minimum. Yet there’s no established correlation between efficiency and effectiveness; many of the investments that are disparaged as overhead – such as research and evaluation, training, technology and planning – can be critically important to building great organizations.
Rule No. 3: Remember that you’re on your own. There are more than 150,000 people in the U.S. who work in the mutual fund industry with the sole purpose of helping people make sensible investment decisions. Conversely, there are fewer than 100 people whose job is to provide the public with information on making effective donations.
Rule No. 4: Consider who needs your help. Because of all our old, hard-to-break habits in how we give, we badly underweight support for those in need. Less than 12 percent of charitable donations end up with human service organizations, which provide housing, food and nutrition programs, youth development, disaster relief and other services.
Rule No. 5: Give when you are ready. Federal tax incentives have relatively modest impact on overall giving, but they certainly do affect the timing of giving: Twenty-two percent of all annual online giving now occurs on Dec. 30 and 31. But when you’re trying to support the most effective charities, rushing to get in a last-minute donation is not a recipe for success.