Generosity is a spirit we should embrace year-round, and during the holidays our mailboxes fill with solicitations from many charities. Many people want to respond with an open heart, but do not want to feel scattered, pressured, or unsure whether their money is really making a difference, and learning how to evaluate a charity can help your generosity have real impact.
Are you giving $10 or $20 to every request that lands in your mailbox, or dumping all unsolicited mail into the circular file? Most of us want to land somewhere in between, being generous without feeling overwhelmed and giving in ways that truly match what matters most to us. When you know how to evaluate a charity, it becomes much easier to say “yes” or “no” with confidence.
Start with Your Values
Ask yourself: What is important to you? What brings an emotional reaction about injustices?
You need to get a read on your own compass: what do you want to support? How much do you want to give? Coming from a military family, my personal experience is supporting veterans. I am also compassionate towards children, especially those disadvantaged. That is the first test a charity has to pass. Does it line up with my values; is it something I care about?
Once you have clarity about your values and the causes that matter to you, the next step in learning how to evaluate a charity is making sure the organizations you support are using your dollars wisely.
How to Evaluate a Charity
Maybe you are like me: you are happy to give your hard-earned money to charity, but you want them to use it wisely. You want to evaluate a charity before giving. Here are some points to check when you are deciding how to evaluate a charity for your own giving:
Financial Health
You want to see 75% of their expenses going to their programs. You want a limited amount going to fundraising or administration.
This information can be found in annual reports and IRS Form 990 filings. If the charity is large it will have audited financial statements. These should tell a story of how much is going to which programs and what the impact of those programs has been.
Assess Transparency
What information is available on their website; do they post governance documents? Who are their board members? Can you tour the charity?
Research Reputation
Many charities sound alike, so be sure of the exact name of the charity. Review their social media posts. What is their community involvement?
Looking at these areas gives you a practical framework for how to evaluate a charity, rather than relying only on emotion or a compelling letter. It helps you feel more confident that your generosity is backing strong organizations, not just strong marketing.
Tools to Help You Evaluate
There are a couple of organizations that can help with this evaluation. Charity Navigator and GuideStar, now known as Candid, review a wide range of charities and turn the information they receive into easy-to-understand scores and summaries.
If this sounds like a lot of homework, these tools make the process much easier. You do not need to be an expert to learn how to evaluate a charity at a basic level; a quick visit can give you a snapshot of a charity’s financial health, accountability, and reputation.
I have found these organizations helpful. One program scored in the 60s due to poor stewardship and negative news coverage, while another agency scored 97 and has expanded its mission in helping veterans. Another time I looked up a charity fundraising on the sidewalk outside a local business; they scored well and their mission aligned with my values of supporting youth and countering bullying in high schools.
Turn Generosity into a Plan
Embrace the season of generosity. Take a moment and create a giving plan that reflects your values, your budget, and the impact you hope to have, so you can respond thoughtfully when your mailbox fills with heartfelt solicitations.
Your charitable giving can also be coordinated with your broader retirement, tax, and legacy planning. A well-designed plan can help you support the causes you care about while being mindful of your cash flow, tax situation, and long-term goals, and understanding how to evaluate a charity is one piece of making sure the dollars in that plan are working the way you intend.
If you would like help aligning your generosity with your overall retirement strategy, Boise Retirement Coach can walk through your options with you and explore how to evaluate a charity, how much to give, and how to make your giving intentional, sustainable, and integrated with the rest of your financial life.
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Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Boise Retirement Coach and Cambridge are not affiliated.