About half of all charitable donations are made between Thanksgiving and Christmas, and this holiday season figures to be a lean one for charities. But giving less doesn't mean donors shouldn't give wisely.
Charitable contributions tend to track the economy, rising a bit when times are good and falling when times are tough. However, contributions lag behind economic rebounds by six to nine months. So even though the economy is on the mend and the stock market has rebounded smartly this year, it still could be a down year for charities.
"Many generous Americans responded to 'rally around the flag' events like 9/11 and the war in Iraq, but that window of opportunity is closing," said Trent Stamp, executive director of Charity Navigator, a New Jersey firm that rates 2,600 nonprofits. "With neither the money nor the motivation to actively support charities this year, we anticipate that Americans will give about 10% less than last year."
Here are some tips for getting the most bang from your charitable buck.
Set goals: Donors should have goals for their giving, just as they do in other areas of their financial life, said Ed McMahon, vice president for programs at the Conservation Fund, an environmental charity based in Arlington, Va.
Donors should consider whether the mission of a given charity is consistent with their own values and beliefs. And they should seek out charities that address the goals that are most dear to them, whether that's environmental protection or helping the homeless, McMahon said.
Investigate: Charities operate with varying degrees of efficiency. It's important to see what percentage of your dollar is going to solve problems, compared with how much is being spent on fundraising activities or to pay administrative costs, McMahon said. In addition, he said, donors should know how much progress the charity is making each year in addressing its stated goals.
The data are readily available. Most major organizations file financial statements, called 990 forms, with the Internal Revenue Service. These forms show how much the charity has raised and how it spent the money. Charity Navigator and the American Institute of Philanthropy take this data and assign organizations ratings for effectiveness and efficiency, which are available on their Web sites at, respectively, www.charitynavigator.org and www.charitywatch.org.
Both organizations list top-rated charities by mission, such as literacy or health.
