The average American gives 2.6% of their income to charity every year. How much do you give?

It’s that time of year again, when everyone is asking you for money. I wanted to refresh my post from last year with some new data and reflections on giving. My hope is that this will help you be more deliberate about how you give - so that when someone asks if you would like to donate to their cause, you already know your personal giving philosophy and budget.

I have been doing this exercise, of evaluating my donations based on my personal priorities, since 2012. That year I did a project consulting for the World Wildlife Fund, and it prompted me for the first time to reflect on how I had donated, vs. reactively giving to whatever cause gave me a compelling pitch.  I was a sucker for NPR donation drives at the time…

Over the intervening five years, I’ve tracked every dollar I donate so that, when the real giving season begins in December (30% of all donations are given in this one month), [1] I can be deliberate about how I give.

Building your charitable portfolio

If you think you would also like to approach giving in a more structured way, here’s my advice.  You can make a copy or download this worksheet if you’d like to “follow along”:

Step 1 - What was your gross income in 2017? Be honest with yourself on this; it should include base, bonus and equity compensation.

Step 2 - How much do you want to give in 2017? A good place to start is your gross income x 2.6%, the average across all Americans in 2015. [2]

Step 3 - How do you want to allocate your donations by “sector”? Philanthropy is a very personal decision, so this should be tailored to your interests, and potentially also the world we live in. I like to think of my 1% donation to One for the World as the “foundation” for my giving portfolio, where I know the ROI is high, and then build the rest of my portfolio around this.

Step 4 - How much have you given so far this year? It can be a bit difficult at the end of the year to remember which causes you gave to, but you can estimate this step if you aren’t sure. You can use the second tab of the worksheet to input your individual donations, if you’d like.

Step 5 - Go shopping for charities! This is the best part of the process - now that you know how much you have left in your “charitable investment portfolio” for the year, identify charities that should get the remainder of your dollars.  This could mean doubling down on organizations that you already give to, or finding a new organization that does work in a charity “sector” that you care about. If you are looking for worthy causes, let me suggest a few sources of inspiration:

  1. GiveWell does rigorous analysis (e.g. randomized controlled trials) to understand the return on investment for every dollar you give to a charity.  Their Top Picks (e.g. Against Malaria Foundation, GiveDirectly) and Standout Charities (e.g. Development Media International, Living Goods, Project Healthy Children) are all excellent organizations, where you can be assured that your dollars are having a massive impact.

  2. One For The World uses GiveWell (plus a couple other sources) to create a portfolio of “Top Picks” that is updated on an annual basis; allowing you to “set it and forget it”.  

  3. If you want to support another cause, but you’re not sure who to give to, Charity Navigator has good insight into ~9,000 of the largest charities.  Their star rating system can help you make sure your dollars are being spent responsibly, but note that this measures organizations based on how they are run, not necessarily on their impact.  If you want to be 100% in your impact, I would still defer to GiveWell or One for the World recommendations.

  4. In general, consider giving to organizations outside of the US; only 6% of donations in the US go to charities that do work internationally, [3] but your dollar can benefit more people in developing countries because your dollar goes much further there.

 

Step 6 - Send the money! I am not an expert here, but there are a few things to consider:

  1. Paper Checks: in the digital era, most organizations prefer receiving credit card or ACH payments, since there can be incremental cost associated with processing checks. [4] So don’t stress too much about the 2-3% credit card fee.

  2. Tax deductions: note that deductions for charitable contributions can only be claimed if you are itemizing your deductions; only 30% of households did this in 2013, though it is significantly more likely to make sense if you are higher on the income scale. [5]

  3. Company matching: a lot of companies will match some portion of the dollars that you give to an organization, whether you donate directly through their platform or if you donate to an organization and provide a receipt. Either way, it’s free money and you should take advantage of it! But (I would argue) you should not count it towards your giving goal (e.g. 2.6%).

  4. Donor Advised Funds: these provide an easy mechanism to proactively set aside dollars and get the tax benefit right away. I’m not expert, but consider setting one up if you know you will be giving in the future and you want the tax benefit today.

Questions?  Feel free to email me at rob@1fortheworld.org!

Footnotes

  1. Network for Good, 2015, link
  2. Based on latest IRS and Giving USA data, 2015
  3. Charity Navigator, 2017, link
  4. Against Malaria Foundation is one example of this; they prefer credit card for amounts below $5K, link
  5. Tax Foundation, 2016, link