Top 5 Donation Sites and How to Budget for Charitable Giving

For nearly two decades, the percentage of American households that donated to charity has declined, from 66.2% in 2000 to 49.6% in 2018, according to the most recent Indiana University Lilly Family School of Philanthropy’s Philanthropy Panel Study.

The dollar amount given, however, has risen 17% when adjusted for inflation – and current events may further inspire donors.

To start donating to charity, consider which topics and organizations you might want to support. Select an organization doing work you’re passionate about. In 2020, 28% of charitable giving went to religious organizations, 15% to education, 14% to human services, 12% to grantmaking foundations and 10% to public-society benefit. Consider one of these sectors as a jumping-off point.

Next, be sure to select an organization with a strong reputation – making sure to do your research and avoid a possible scam.

Top 5 Donation Sites

These charitable giving sites can help you find legitimate nonprofit organizations:

  • Charity Navigator: This site includes top 10 lists of charities, like the top 10 charities to watch list, and lists of reputable charities by topic, such as gun violence protection or charities related to the crisis in Ukraine.
  • Charity Watch: This site provides a database and rating system for charities that generally spend 75% or more of their budgets on programs, spend $25 or less to raise $100 in public support and do not hold excessive assets in reserve, alongside other requirements.
  • Consumer Reports: Although this report hasn’t been updated since 2019, it could be a good starting point and provides tips for further vetting charities yourself. It’s always wise to do a bit of your own legwork before donating.
  • BBB Wise Giving Alliance: Search by charity name to get more information about a particular organization before donating, or check out the site’s alphabetical list of charities and other resources like its wise giving guide.
  • Guidestar: This site includes a database of more than 1.8 million charitable organizations recognized by the Internal Revenue Service.

Once you know which organization you’d like to support, begin thinking about the size of your donation.

How to Budget for Charitable Giving

Charitable giving should be part of your day-to-day budget as well as your long-term financial plan, according to Amy Richardson, a certified financial planner at Schwab Intelligent Portfolios Premium. Instead of focusing on a specific dollar amount you’d like to give, she suggests reviewing your expenses and remaining flexible.

“It is important to think of the big-picture and create a plan for gifting to ensure that your charitable giving goals fit in with your overall financial situation,” Richardson wrote in an email. “Gifting is a wonderful thing to do, but you want to avoid jeopardizing other important short-term and long-term goals – like retirement. It’s also important to think about why you want to give, and which causes are most important to you. Putting some parameters around your gifting efforts can be motivating and it can help make your gifting as strategic and impactful as possible.”

One way to budget for charitable giving is to place your expenses for the year into three buckets: nondiscretionary, discretionary and savings. Nondiscretionary expenses include rent or mortgage payments, transportation, food and other essentials. Savings includes 401(k) contributions, savings for a child’s education, personal savings and even some debt repayment like the payment of student loan debt.

Now that you’ve separated out your personal savings and essential needs, review your discretionary expenses – this is the wiggle room in your budget from which any charitable giving can be taken.

Alongside the core components of any comprehensive financial plan – like retirement planning, debt management, risk management and estate planning – Edward Moyzes, CEO and founder of Strategic View Advisors, a Northwestern Mutual Private Client Group affiliate, says charitable giving can be a component of your plan as well.

“Individual circumstances might necessitate education planning, charitable giving planning, tax planning, or special needs planning,” Moyzes wrote in an email. “Whatever your goals may be, there should be a plan in place to achieve them and the plan should be adaptable to your changing circumstances.”

The exact amount families choose to donate – if they donate at all – is highly personal but can also be influenced by external factors.

“Prior research shows that economic factors often affect household giving,” Xiaonan Kou, associate director of research and Jonathan Bergdoll, associate director of data partnerships at the Lilly Family School of Philanthropy, wrote in a statement. “For example, growth in (gross domestic product) and the stock market is found to be positively associated with giving. Much of the decline in the household giving participation rate occurred after the Great Recession of 2008. Socio-demographics, e.g. income, education, are often linked to household giving. The general decline in interpersonal trust and empathy seen in our society today may also affect charitable giving.”

The coronavirus pandemic may have further affected individual giving.

According to focus group interviews conducted in 2021 by the Indiana University Lilly Family School of Philanthropy, “recent events, such as the COVID-19 pandemic and the movements for racial equity and justice, evoked an increased desire in donors to address root causes of issues through charitable giving and to make a long-term impact on issues that they care about,” Kou and Bergdoll say.

Once you have determined the organization you’d like to support and the size of your donation, consider whether you’d like to donate weekly, quarterly or annually, how you’d like to achieve the logistics of donating and what kinds of tax consequences or benefits you may incur.

“Depending on your financial situation, an advisor might suggest different charitable-giving vehicles like a donor-advised fund (DAF), a private foundation, or a trust,” Richardson says. “It could also make sense to give through certain types of accounts, like an IRA, to maximize the amount you give and the tax deduction. Leveraging the advice of an expert can help your dollars go further and increase your impact on the organization you want to support.”

Remember that charitable giving, no matter the size of your donation, is a long-term habit worth establishing that can do good and even set a positive example for your children and others.

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