Posted by Alicia Waltenberger.
After we’ve taken care of our own needs—and those of our family—our natural instinct is to help others in need. That might mean giving back to communities and institutions that once helped you or a family member. Or making a difference to lives less fortunate than your own.
Many of us start donating spare change in childhood, often to charities that successfully appealed to our emotions. We continue to give all we can, often in a haphazard fashion, wishing we had the resources to make more of an impact. Often wondering, along the way, how exactly our dollars were being spent—curious to see how our donations changed someone’s life for the better.
To help you give more to causes you care about, here are 10 smart ways to donate more effectively and really make your mark.
- Make a difference at work. Whether you’re an attorney, HR manager or financial advisor, you can use your skills to serve your community—or serve clients who help others. I feel blessed at TIAA, helping charitably minded Difference Makers to plan for their retirement. If you’re looking to change jobs at some point, consider working for a nonprofit organization, or a company with a strong nonprofit heritage and a genuine commitment to social responsibility and philanthropic engagement. Start by checking out the mission statement of potential employers to find a company whose values genuinely align with yours.
- Give back to your university. Your alma mater (literally “bountiful mother”) nourished your mind, and it’s likely you benefitted from the endowments of previous alumni. As an alumnus you have the opportunity to contribute to the education of future freshmen. Depending on the size of your estate, you can make a real difference by establishing a scholarship program in your will, or by simply leaving something to the college library.
- Set up a private foundation. If you don’t have any family members or any other obvious heirs, you could establish a private operating foundation, granting money to your own programs for charitable purposes. However, it’s typical to fund a foundation with more than a million dollars. There’s another type of fund that allows you to support organizations, and you can create one with just a few hundred dollars…
- Open a giving fund. Consider opening a giving fund, also known as a donor-advised fund (DAF). When you contribute to a DAF, you get an income tax deduction right away (on up to 60% of your adjusted gross income if you are giving cash), and you can leave your contributions invested in the fund while you decide which charities to donate to. Any growth on your investments will remain tax free. Let’s say you start your fund off with $1,000. You get an immediate income tax deduction for the $1,000 contribution—yet you can parcel that donation out over the course of several years. A DAF is unique in that it gives you an instant tax benefit plus the luxury of time to research charities and decide which ones will make the most positive impact on programs you’re passionate about. (Side note: Contributions to foreign organizations are not deductible for income tax purposes).
- Give more than just cash. When people give to charity, they usually donate cash. But with a donor-advised fund, you can also bestow a house, car or any other belonging. Anything of value can be sold by the organization you choose to support—even your stamp collection—and the proceeds are then used to fund their charity work. When donating assets other than cash, you can generally deduct the fair market value of the property on your tax return.
- Find causes close to your heart. So you have a nice amount sitting in your donor-advised fund, that’s a great start. But you really want to make a mark with your donation. There are literally over a million charities out there, so where do you start? Log in to your DAF account and use the search tool to find nonprofits with a mission you really believe in. For a more comprehensive list, go to Guidestar.org, a national database of 1.8 million IRS-recognized, tax-exempt organizations. You can do a keyword search or narrow it down by category. For example, Animal Rights or Disease Prevention & Research. You’ll then get a list of organizations under that umbrella, and get informed about each one, i.e. its central mission, the programs it runs, plus details about its operations and financials (how much it receives in gifts, grants and donations, and how it spends that money).
- Support your local community. To benefit your immediate community, narrow your Guidestar search to your local area, and see what programs and events could benefit from your financial support. After you’ve found a cause that resonates with you, whose mission you really believe in, consider donating some funds from your DAF. The beauty of keeping it local is you get to see the fruits of your giving with your own eyes.
- Do your due diligence. Make sure you look beyond an organization’s website, TV ads and your own gut feelings. A well-designed site or heartrending commercial means they have a good marketing and/or PR budget, but how is the rest of that donated money being spent? Charities have to report their finances, and you can read those reports on Guidestar.org. View each charity’s tax forms, balance sheets, the number of employees and board directors, and even discover who the highest paid employee is. Some charities will choose to report more of this information than others, so make sure you are satisfied that your money will be well spent before donating. Remember, there are thousands of charities you might want to support—you just haven’t heard of them yet.
- Volunteer for a local charity. You may decide to give some of your time before giving your money. Using Guidestar.org, shortlist a few organizations and dig deeper in order to find out how they actually improve lives. If a local dog shelter makes that shortlist, you could volunteer your time first. Get a feel for how donations are being used to promote the well-being of those animals. Spending time there physically may give you ideas as to how their budget could be spent more efficiently, or how fundraising efforts could be improved. Get to know the board of directors, and think about joining the board yourself…
- Take on more of a leadership role. Being on a board means making a real commitment to an organization—you’ll be expected to devote a considerable amount of your time, and sometimes a pre-agreed contribution or “board ask” (which you can do via your DAF). Read more about joining a board here.
Whether you want to make a difference in the world today, or you’re planning to leave an impactful legacy in the future, hopefully a few of these suggestions have helped you look at charitable giving in a new light.