In Focus – SCCCU Blog

If you’re fortunate enough to have more than you need, it’s always nice to give back, especially around the holidays. But where should you give your money? So many charities could do amazing things with your money — the challenge is determining where your gift will be best used to make the most significant impact. Here’s a rundown on choosing a reputable charity where your dollars will make the most impact possible.

First, Decide Where You Want to Make an Impact.

You must decide whether to give locally, nationally, or internationally (or all). If you opt to give locally, there are countless options right in your backyard. For example, you could assist your neighborhood soup kitchen in securing the necessary ingredients or help your local animal shelter purchase supplies. Plus, local groups are often incredibly efficient with spending, meaning most of your money will go straight to the causes that need it the most. Another benefit to donating locally is that you can immediately see the impact in your community.

If you would prefer to make an impact on a national or global scale, many amazing charities help millions of people during their times of greatest need, including the United Way, Habitat for Humanity, The Salvation Army, and the American Red Cross. Countless organizations target specific diseases, such as The American Heart Association or the Alzheimer’s Association. These charities are household names and often offer donors a chance to come together at races, fundraisers, and networking events throughout the year.

Next, Make Sure Your Charity is a Genuine Non-Profit Organization.

The most important rule when choosing a charity is simple: Ensure the organization is a certified 501(c)(3) non-profit. Unless it has an official 501(c)(3) designation, it’s not a charity — and you have no real way of knowing where your money is going.

While not all 501(c)(3) non-profit organizations function as charities, any organization operating as a charity must be a 501(c)(3) to take donations. When you verify an organization's status, you’re not only ensuring your money will be used in the way you intended, but you can also get a tax deduction for your donation — only donations made to registered 501(c)(3) nonprofits are eligible for a tax deduction.

How Can I Verify a Charity is Genuine?

Any legitimate charity should be happy to show you its 501(c)(3) certificate and tax ID number (this information should also be on its website). The website should also have transparency into what percentage of its donations are dispersed (used to fund programming) vs. what percentage goes toward covering overhead costs. If a charity is unwilling to offer that info, that’s a red flag.

You can start your search for a reputable charity online. For example, you can see how often a charity posts and engages with followers on social media. If the charity seems to exist in a black hole, with no solid public information, it might not be on the up-and-up. After you’ve checked out the website, continue your search by verifying an organization's information on the following sites: The Better Business Bureau’s Wise Giving Alliance, the charity search tool from the IRS, Charity Navigator, Guidestar and Charity Watch. These websites keep records of which non-profit organizations are officially registered as 501(c)(3)s, and in many cases, they’ll have a breakdown of exactly how donations are spent.

“Taking these few steps can ensure legitimacy with the cause you’re looking to support and also that your dollars donated are actually reaching the people in need,” says C.R. Celona, CEO and founder of the app Cluster, which aims to help drive social change.

Breaking Down the Numbers

Regarding how an organization will (ideally) use the funds it receives, Celona says to follow this rule of thumb: At least 50% (and hopefully much more) of a charity’s annual donations should go directly to the cause, not toward administrative costs. For example, if you see a charity paying extraordinarily high salaries to its executive team and only putting a small amount toward programming or services, you should think twice about giving them your hard-earned dollars.

Also, when you think about how much to give to each charity, remember that it may be more helpful to individual organizations when you go deep instead of wide. In other words, while giving $10 here and $5 there is always appreciated, it doesn’t have the same significance as picking fewer causes you believe in and giving more, explains Julie Castle, CEO of the Best Friends Animal Society. “Instead of making lots of small donations to multiple groups, you will have a bigger impact by giving larger gifts to a handful of charities,” Castle says.

During Times of Crisis, Watch Out for Charity Scams

When disaster strikes, we often want to give as much as we can, as quickly as we can, to aid those impacted. Unfortunately, scammers know this and will often look to exploit your goodwill by setting up fake charities to steal from their victims. According to the IRS, charities lose an estimated 5% of their annual revenue to scams. These scams often begin with a cold call, an unsolicited text, a social media message, or an e-mail. So, as much as you might want to respond directly to that outreach, instead, hang up or delete the message and go directly to the charity’s website. That way, you know exactly where your money is going. In other words, don’t feel pressure to give before you vet an organization thoroughly