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Donate Money Effectively

Updated: Jun 7, 2023

We all want to help those who need it, but sometimes it's difficult to know how. The only way I had ever given away money until recently was handing $5 or $10 bills to people sitting on the sidewalk, and I've heard that that's one of the worst ways to support those who need it.

Just like money itself, donating is a somewhat taboo subject. No one wants to be greedy but it's also hard to know how much to give. Christian and Jewish religions argue that 10% of your income is a fair amount, whereas Islam suggests that 2.5% is reasonable.

73% of Americans gave money to charity in 2020, down from 79% the previous year.

You can look to those you respect for an idea of how much to donate -- Barack Obama donated 34% of his total income during his presidency (including all of his Nobel Peace Prize). Warren Buffett has promised to give 85% of his net worth to the Bill and Melinda Gates Foundation.

You might expect that the poor donate a smaller percentage of their income, but the opposite is actually true. Donations generally increase as income increases, but not proportionally. According to USA Today, the average family making under $15,000 donates an average of $1,471, which accounts for 9%+ of their income. Meanwhile, the average family making $50k to $100k donates an average of $3,296, or 3.3% to 6.6% of their income. This pattern continues across all income brackets.

At the end of the day, you need to give an amount doesn't keep you awake at night. And whatever the number, keep reading to learn how to make the most of it.

1) Choose an organization that matters to you personally.

For half of my elementary school years, our principal picked a cause for the school to support through penny drives, auctions, and raffles. He usually picked the Red Cross or UNICEF, which was fine. But none of us felt particularly driven to action because we had no connection to those organizations.

Possibly realizing the issue, the school eventually let us nominate and vote on an organization to support. The money came pouring in when we picked a classmate's family who lost their home, the American Cancer Society after our teacher had to leave school for chemo, and so on. We are more likely to put our time and money toward a cause when we feel personally connected and impacted by it.

Find a cause that matters to you and do some research about how to help out. Here is a list of ways you can help stop police brutality, and another article about how to help victims of the coronavirus.

2) Give a lot to several causes instead of a little to many.

When learning about the organizations and causes available, you might be tempted to donate to all of them. I know that scrolling through GoFundMe, you'll probably be drawn into every story and fundraiser.

It's human nature to want to help everyone, but to make the most impact you need to narrow your philanthropic search.

You might find in particular that donating locally can make a larger impact. A small non-profit would appreciate $100 a lot more than an international organization. Your local library could use the money more than the American Library Association, for example.

3) Learn what your money will do at different organizations, verify this, and then give.

If you donate to a GoFundMe, you should know what the organizer will do with the money. In addition, donations are guaranteed by GoFundMe and will be refunded if they aren't used as indicated or if you aren't satisfied.

No matter where you donate, research the organization (both on their platform and elsewhere) to learn how they use the money. What percentage of your donation actually goes to the people that need it? How far will your donation go?

For example, $50 to Firstbook provides 20 books to a child whose family can't afford it. $20 to Heifer gives a starter flock of 10-50 chickens to those that need it in 21 developing countries.

For reviews of organizations that need donations, read the Charity Navigator. They provide ratings of each company based on finances and accountability. The site also tells you what impact your donation might have.

And lastly, don't forget that your donation (no matter how big or small) is tax deductible! You won't pay taxes on whatever income you choose to donate if you itemize at tax time -- just make sure you keep a receipt or proof of donation. This page explains all the rules and regulations surrounding charitable donations, but it's really simple.

Where do you choose to give your hard-earned money? How do you choose causes to support?

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