NEW YORK (MarketWatch) -- What do you do with all
those unsolicited little gifts that unknown charities relentlessly
send you through the mail? Where do you stash all those pads of
return-address stickers and all those chintzy key chains and
calendars, not to forget the occasional shiny new nickel or quarter
or crisp dollar bill?
Answer: If you're smart, you just throw them out.
So advise many professional managers in the world of charities. They
argue that effective charities don't need to use giveaways; that
unlike the stock market, where it pays to diversify, it is better to
invest in just a few charities; that you should concentrate or focus
your charity contributions so that they do the most good where you
want them to do it.
By contrast, if you fall for the sucker bait and send in countless
small contributions -- $25 each or less -- you both blunt your sword
and inspire the small charities to buy more mailing lists and send
out more little gifts, and so on.
"If you spread your contributions around, your name is likely to
wind up on one of those [mailing] lists," says Sandra Minuitti, a
spokeswoman for Charity Navigator, which rates the financial health
of charities. "The charities just sell them to each other."
She says contributors should be proactive. They should not wait
until they get an appeal from an organization they never heard of.
Each family should discuss which causes it intends to concentrate on
and then make a charity budget, says Barbara Vanderkolk Gardner,
recently retired president of the Fannie E. Rippel Foundation, which
supports women's causes.
She adds that if a child is mature enough to receive a regular
allowance, and make gifts from it, that child is old enough to
participate in a discussion of which causes a family should give to,
and how much. That way, the child grows up amid a tradition of
When you're ready to donate, go to the source, advises GuideStar
president and CEO Robert Ottenhoff. "Visit the Web site of the
charity itself. That's a good measure of how willing they are to
share information with the public."
Ottenhoff also advises asking a charity three questions: Why should
I give to you? What will you do with my money? How will you measure
the effectiveness and impact of your organization?
Before giving to a charity, assess its financial health. According
to Charity Navigator, "the most efficient charities spend at least
75% of their budget on their programs and services and less than 25%
on fund-raising and administrative fees."
To see how a charity stacks up, visit www.charitynavigator.org and
search by charity name. The site will give a quality rating for the
organization from one to four stars (one is poor, four is
exceptional), and provide a snapshot of its financial and leadership
The site tells what percentage of its income the charity spends on
fund-raising and administrative expenses (vs. program expenses), how
much revenue it generates and more. It even offers a side-by-side
comparison with similar charities.
By visiting www.guidestar.org, you also can find the charity's Form
990, the annual return that certain federally tax-exempt
organizations must file with the IRS. The site lets you view the
three most recent 990s of many organizations for free.
One trend in philanthropy is that more people are spending more time
studying an organization before they donate. There is no
one-size-fits-all formula for how much to give. Two percent of
personal income is commonly cited, though professionals say that
amount would be a stretch for many donors.
In any event, Americans are remarkably generous. Last year they gave
$260 billion to organized charities, with more and more conveniently
giving online with their credit cards. Most of the money came from
individuals, not foundations or corporations.
Less-affluent people tended to give more than the affluent, and
people from the South gave more than in the North, on a per capital
basis. The biggest recipients were religious groups, including
churches and synagogues, followed by educational institutions and
In recent years the only category that has declined is the arts. On
the other hand, human-services charities -- such as food banks,
homeless shelters and meals on wheels -- have seen an uptick,
probably because of the attention that Hurricane Katrina drew to the
plight of poor people in America.
But when it comes to charities in America, almost all the numbers
have been going up, and every sign suggests they will continue to do
Marshall Loeb, former editor of Fortune, Money, and The Columbia
Journalism Review, writes "Your Dollars" exclusively for MarketWatch.
By Marshall Loeb & Ismat Sarah Mangla,
Last Update: 12:03 AM ET Nov 8, 2006