How to Donate to Charities Wisely

Co-authored by Direct Relief

Last Updated: November 26, 2020 References

Donating to a charity is a noble cause, but it is only a smart decision to give your money if it's done wisely. There are many bogus organizations pretending to be legitimate charity organizations, making the ability to donate to charities wisely a difficult task, but not an impossible one. Think about the following steps when weeding through various charities in order to find one to give money to.

Part 1

Part 1 of 3:

Deciding How You Will Donate

1
Review your income and expenses and determine what you can afford to give to a charity. Giving something is better than giving nothing, but it would be smart to establish a specific yearly goal for donations so you stay within a safe budget.
- Even if you want to help charities, under no circumstances should you donate so much that you'll end up being in need of money yourself.
2
Determine what type of charity you want to give to. Start by thinking about your values. What do you want to encourage or help others do? Would you rather support local improvements or international causes? Think about what charities you are currently giving to, if any, and think about whether or not you think your money is being used effectively. After considering these ideas, search online for charities that are in tune with your giving goals.^{[1]
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3
Consider donating overseas. The amount of good that your money can do varies between charities and locations. This is particularly true in developing countries, where your money can go a lot further. This doesn't mean you shouldn't support local charities as well, but you should know that your money goes further overseas.
- For example, putting a student through grade school in the United States can cost upwards of $100,000. In some developing countries, you can save about 30 lives for the same amount.^{[2]
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4
Donate with friends and family. You can make even more of an impact by giving collectively with others. Talk with your friends and family members to identify causes that you all support. Then, make a plan to compile your resources and make one collective donation.^{[3]
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Part 2

Part 2 of 3:

Investigating Charities

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Look for charities supported by large organizations or companies. Large organizations like the Gates Foundation and The Robin Hood Foundation devote large amounts of time and energy towards selecting and investigating worthy charities. Look around on their websites and those of other large charitable organizations for a list of charities to which they have donated. If any match your interests, go ahead and donate to those charities. This way, you can save yourself the effort of investigating each charity's legitimacy.^{[4]
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2
Research all charities that you are interested in giving money to by contacting them directly and requesting information. Charities are happy to share their mission statement and financial reports. Request a copy of their annual report so you can get a complete picture of their objective. Any charity that is unwilling to share their information, even though they are obligated to do so, is not a charity you should donate to.^{[5]
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Make sure that the organization is registered or licensed accordingly. Requirements for charities may vary between locations, but all legitimate charities are registered with 501(c) 3 tax-exempt status. This means that the IRS officially recognizes them as a charity and has extended them tax-exempt status. Ask for evidence of this certification before giving to any charity.^{[6]
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- You can also search for the charity on watchdog websites like CharityWatch or Charity Navigator. If the charity isn't listed on any of these websites, be wary about their legitimacy.
4
Ask what percentage of your donation will actually go toward the charity, as opposed to administration and fundraising costs. Opt for charities that portion at least 60% of donations to the cause itself. Anything less should be questioned. Inquire further about the charity's compensation for executives and spending on fundraising events.
- If you really want to assess a charity's spending, you can request copies of their most recent financial reports, called Forms 990. Whether or not they are willing to show these reports can also indicate the charity's transparency.^{[7]
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- Charities are organizations that require money to function and to expand their reach. Be wary of charities on the other extreme (where close to 100% is said to go to the cause) since this implies minimal organizational efforts or suggests outright lying.
5
Beware of charity organizations that you think you know. The name may seem recognizable, but make sure that the charity you are interested in is the real deal. Avoid dubious charities that have names similar to already established organizations. You may want to inquire about the legitimacy of an organization with a watchdog group focused on confirming the validity of certain charities.^{[8]
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Focus on a small number of charities. Instead of spreading out your donation budget to cover many charities, pick a few and concentrate your giving. Making large donations allows the charity to spend more of your money effectively because they are not spending as much of the total on processing the donation and paying employees. In addition, your donation will be more able to make a difference when it is relatively large.^{[9]
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Part 3

Part 3 of 3:

Making Your Donation

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Be cautious of charities that use pressure tactics to get you to donate on the spot. You should not feel guilty or be bullied into giving your money. If you are not comfortable with the responses you received for your questions, or the charity's administrators have been vague about charity details, or you just don't want to donate to a charity, then don't.
- If you still like the charity's mission, thank them for their time and give yourself additional time to inspect the charity.^{[10]
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Keep a record of your donations for tax purposes. Make sure you get a receipt for your donation. If the donation is over $250.00, you will need the receipt to state the amount of the donation and name of charitable organization. Note that you can only deduct your contributions from your taxable income if the organization has tax-exempt status.^{[11]
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- You can also donate money using checks, rather than cash, if donating in person or by mail. This is another way to ensure that you have a record of your donation.
3
Make your donation directly. Rather than work through a third-party giving website, give directly to the charity you wish to support. This ensures that your entire donation amount actually goes to the charity (or that any of the money does). Even if a fundraiser requests your donation for a specific cause, contact the charity to make sure the fundraiser is really acting on their behalf.
- Always make checks payable to the charity rather than to a middleman.^{[12]
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- Fundraisers are not legally required to give money directly to the charity, so make absolutely sure they are legitimate.^{[13]
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4
Don't be bribed into donating to a charity organization. You should choose a charity based on a cause that you believe in, not the gift that you get back when you send money. Even if the charity sends you the free gift first and then asks for a donation, you still have the option to walk away.^{[14]
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