Giving to charity can be – like many things in life – fraught with pitfalls. It should be simple, and most folks think of it in that way – write a check or hit the ‘paypal’ button and off goes your money, supposedly to do good. How would you feel if you discovered that a high percentage of your gift went not to the end user who really needs the funds, but to administration or marketing? Or that the endowment that you are flowing cash to has a terrible long term return? Or that your favorite charity is competing with other charities to save the Tiger, in a way that actually deters the desired result?
We think of giving to charity as an investment, similar to picking the next well-performing stock or bond. Steps you can take to begin viewing giving in this light are:
1. Check your charity at charitynavigator.org for how much of every dollar you give actually makes its way to the end user. Keep in mind that new charities, and even some older ones may not show up or may show poorly on charitynavigator for various reasons. When you see a poor result, pick up the phone and call the charity to ask for an explanation.
2. Try to resist giving tiny amounts to lots of charities. Instead, put them in competition for your money by choosing the best amongst them, and plying those few with more cash.
3. Apropos of #2, ask the charity how they know they have been effective, and how they’ve used money more efficiently over the years. Did $100 feed 10 people 10 years ago and now they’ve figured out a way to feed 12 for the same money? If you are making contributions to an endowment, ask for the endowment’s return history and investment policy. If it’s not at least as good as your own investment program, you are better off skipping endowment contributions to that particular organization; instead, given to their general fund.
4. When you apply #2, you may be given a phone number for a contact person at your charity of choice. Having that person’s ear can help you track what’s really going on with your favorite causes.
5. Inspect the premises if you can. We visited World Wildlife Fund in D.C. and interviewed the scientist in charge of endangered species – a great experience that only made us more likely to contribute.
A final thought for those investors who prefer socially responsible investing and are sometimes frustrated in the search for good performers in that space: one alternative to hewing to socially responsible investing is to compromise to some extent on those criteria, then make up for your transgressions by increasing your charitable giving, focusing on needs that matter to you.