The Personal Part of Charitable Giving

In addition to the mechanics of charitable giving and the associated tax aspects of charitable giving, there are some very personal questions to consider when making charitable gift decisions.

1. Deciding how much to give

How much you decide to give is highly personal and heavily influenced by context and personal history. Development officers know that you tend to give more if you are asked, if you work as a volunteer, and/or if something has touched your life, drawing you to support a particular charity. They also know that you will give more reliably, and hence give more, if your contributions are set to occur automatically.

While data is not perfect, this interactive website suggests that Americans who itemize deductions give about 4.7% of their discretionary income to charity with wide variations by income level, age, and neighborhood.

Is there a percentage of discretionary income that you think should be directed to charity? Is that percentage amount different in different stages of your financial life?

2. Checking out a charity’s finances and mission

Checking out your favored charity is a smart practice, as is reading the literature provided by the charity and doing your own internet search for any charity that catches your interest. In addition, consider these online resources:

Charity Navigator is a large independent resource for checking out a charity, including the Form 990 for any of the charities they cover. (Form 990 is the tax return required of all non-profits except churches. It provides a wealth of data, including compensation of key executives.)

Great Nonprofits is an emerging go-to website where individuals provide personal reviews of specific charities.

Guidestar offers detailed information on various non-profit organizations.

What standards do you want to see in a charity before making a large contribution?

3. Deciding whether or not to give a large lump sum

From a donor’s point of view, giving a large lump sum can be tremendously gratifying but there are caveats, mostly having to do with whether the funds will be used as you envision.

Think ahead: What could make you regret giving a large gift? If the charity has potential bankruptcy-type issues or if you are not yet fully informed about the charity’s performance with respect to both mission and finances, giving a series of smaller gifts might make more sense than giving a large lump sum.

Large sums also may not be optimal if you are newly ramping up charitable giving in response to some personal life event or financial life stage that makes you better able and willing to make donations. In that case, starting out slowly is protective. In the process of giving, you learn a lot about yourself and about the charity.

NOTE: What if your “large lump sum” is in fact a small dollar amount? For example, what if you are a new graduate on a tight budget and considering a gift to your alma mater? Remember that colleges are measured in part on the gift participation rate of their alumni; even a very small gift will help your school. Plus, you may find that you like being “part of the club” of alumni who remain close to their school.

If giving a donation that is large for your budget, what do you need from the charity in terms of recognition and performance? How will you measure the success of your gift?

4. Determining when to cease giving to a particular charity

It may have already happened to you: a charity to which you have donated disappoints you by some action or inaction on their part, or you become uneasy about the charity’s financial condition, management, or mission. How do you decide when to stop contributing?

If your goal is to give only when there is tight alignment of the charity with your values and preferences, you might pull back on donating in response to some specific circumstance. The challenge is separating out a true difference in outlook versus something more transitory. If charities don’t get donations, at some point they don’t exist.

How much would you care if the charities you favor in principle but not in practice ceased to exist?

5. Figuring out the purpose of your charitable giving

In your life, are charitable gifts mostly a vehicle for community involvement, an expression of deeply held values, or best described as an unexamined personal habit? Charitable giving, like other financial decisions, develops from who you are, what you care about, and where you find meaning. It changes as your life experience changes, and reflects a kaleidoscope of values and emotions. That’s why financial advisors offer advice on how to give, but not about how much or to which charities to give.

In this stage of your life, why, how, and how much are you giving to charity?

Interestingly, we end this three-part mini-series of charitable giving blog posts with the identical, initially motivating question. Excellence in financial planning, as in other endeavors, often involves pausing to take a fresh look at what you care about, and then moving forward with better alignment between actions and values.

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