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How to be smart about charitable giving over the holidays

Guide to holiday giving
How to be smart about charitable giving over the holidays 01:56

Charitable donations have reached new records for two years running, according to a Giving USA report published in June 2016, but with more than one million charities across America, knowing which cause to donate to can get tricky. 

Many charities get up to half of all the donations they receive throughout the year in the five weeks between “Giving Tuesday” (also known as the Tuesday after Thanksgiving) and New Year’s Eve. One reason for the crush: the Dec. 31 IRS deadline for donors to make contributions to get tax deductions for the calendar year, according to Charity Navigator, a nonprofit watchdog that has been rating charitable organizations in the U.S. since 2001.

Charity Navigator offers a zero to four-star rating of approximately 8,000 U.S.-based charities operating across the globe. Here are some of its tips for “intelligent giving” during the year-end season.

Be a proactive donor rather than reactive donor: Make sure that a charity is really doing the work you’re interested in supporting, and not assuming that it does. Take the time to figure out what causes you’re really passionate about. Say, for example, you want to help patients with a particular disease: Do you want to invest in a large, national charity doing research and working toward a cure? Or do you want to support a local charity in your community providing direct care? 

Beware those dinnertime phone calls: Causes that come calling in this fashion typically tug at the heartstrings, but they’re not necessarily sensible ways to give. Too often they’re not even legitimate charities. Instead, after determining what you want to accomplish with your donation dollars, be sure to vet the charity to know that it, too, can accomplish that goal.  

Look under the hood: The first question a donor should ask about a charity: “Is it going to put the majority of my contribution toward programs and services?” Charity Navigator’s website says at least half of a charity’s budget should go toward it’s programs, and no more than 20 percent should go toward fundraising and marketing costs. The charities it lists with zero star ratings are either very inefficient of have very bad governance policies.

Beware of nepotism: Consider whether a charity has the right board structure; in other words, unless a charity has at least five independent voting board members, you should be weary of giving to their organization.  

Make sure you can evaluate impact:  Can a charity provide more than heartwarming pictures of the people or projects it has helped -- can it provide data about the programs it’s running and the return on your investment? Charities today can also take advantage of social media, technologies and videos. 

In it for the long-haul: The key to bringing about meaningful change in the world is following a more informed giving pattern, and then sticking to a charity of your choice for the long term.

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