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6 Questions to Ask Before You Donate Money to a Charity

December 1, 2022


1. Do your research

Like we discussed in Community Impact 101, be sure you know all the details before you hand over your money. With the rise in popularity in recent years for sites like GoFundMe, Givebutter, and Donorbox, it’s never been easier to instantly give to causes that matter to you. Many organizations also use text messages or QR codes as a quick way to donate too. But all of these innovations invite scammers to try and take your money and run – without a charitable thought in mind. 

Below are a few tips from the FTC to avoid scammers. 
1. Find out who’s behind the crowdfunding request.
2. Do a reverse image search of the photos used on the crowdfunding campaign page. 
3. Do your own vetting.
4. Find out what happens to your money if the project doesn’t get off the ground.
5. Check where the donation link goes.

You can learn more at their full articles, including:
Donating Through Crowdfunding, Social Media, and Fundraising Platforms
How to Donate Wisely and Avoid Charity Scams.

2. Read their annual reports

Every charitable organization should be transparent with their volunteers and supporters. . While some organizations with larger budgets may share their annual progress on dedicated websites or downloadable fancy documents, all charities, even local ones, should be able to provide the information. 

According to our 2022 Happy Money Giving Survey, people ranked these five reasons as most important when considering what charities or causes to donate money toward.
– Belief in the social cause’s overall goals/purpose
– Works with other organizations I care about 
– A good social reputation
– Impacts my local community
– I can see first-hand proof of its impact 

3. See how much of each $1 goes to the cause vs. the organization

At a minimum, every charity should be able to tell you how every dollar was spent. But some organizations will also indicate what portion of each dollar goes directly to the cause. 

For example, the American Red Cross states they are, “proud that an average of 90 cents of every dollar we spend is invested in delivering care and comfort to those in need.” While organizations like The Nature Conservancy share in their 2021 Annual Report that their “programmatic efficiency” is 69.2% which means 30.8% of every dollar is spent on things like administrative expenses and fundraising. Websites like Charity Navigator also provide a “Give with Confidence” score that breaks down each charity’s financial ranking along with a rating for accountability and transparency.

Different organizations have different expenses based on their cause, so it’s up to you to decide what is a good investment of your money based on your values and goals. 

2022 Happy Money Giving Survey Insight: Older and younger adults donated money at the same rate this past year. The average age of those who donated monetarily was 47.2 years old, while the average age of those who volunteered was 47.7 years old.

4. Check out their online reviews

Definitely check out charity specific websites but also use everyday tools like Google Reviews. This can give you a sense of the experiences other people in your community have with the particular charity. This can be especially helpful with large or nationwide organizations that may have different reputations or experiences based on your location. 

5. Confirm if monetary gifts are tax deductible

Not all “charities” are created equal when it comes to how the IRS views them. If being able to deduct your charitable contributions on your taxes is important to you, then read the fine print.

According to TurboTax:
→ Religious and charitable organizations typically fall under section 501(c)(3) and can receive tax-deductible donations. 
→ Not every section allows these deductions. For instance, social welfare and civic organizations registered under section 501(c)(4) don’t qualify.

There are lots of nuances when it comes to what you can and cannot claim on your taxes. Do you research for your specific needs, and check out info from the IRS like this article on Charitable Contribution Deductions. And when in doubt, reach out to a tax professional. 

6. Ask how you can track progress toward the project

Some monetary donations will be general gifts to help the entity complete their mission. But others will have a specific goal in mind. Be sure to ask how you can track the project. If it’s an initiative to create ten community gardens by 2025, find out where you can learn about progress updates on a regular basis. 

For example, Charity: Water provides a map to see all of their clean water projects along with sensor data to see each well in action. Not all charities will be this high-tech, but even a monthly newsletter is a great way to stay up-to-date on your giving impact.

According to our 2022 Happy Money Giving Survey, of the 59% of people that donated money – these were their top 3 social causes:
→ Human services (31.3%)
→ Animals & Wildlife conservation (14.4%)
→ Health & Wellness (13.1%)

For even more tips on how to give safely and with intention this season, grab your copy of the 2022 Giving Guide by Happy Money.