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Eight Surprising Ways to Improve Your Charitable Giving

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Americans reach into their pockets and give over $300 billion to charity annually. It makes us feel good and does good, but it doesn't do as much good as it could. Evidently, most people use intuition rather than research to identify the highest performing charities. What many people don't realize is how frequently conventional wisdom and intuition lead people in the wrong direction. This article presents eight important, but often overlooked ways to increase the impact of your giving.

Give to three or fewer charities.

Make larger donations to a small number of groups in which you have the most confidence. Giving smaller donations to many good charities spreads your resources thin, whereas focusing your giving where it matters most is more likely to achieve greater results.

Don't let overhead costs dictate your choice of charities.

Nobody wants their donations to be wasted on excessive overhead costs, but overcompensating by selecting the charities because they have the lowest overhead costs is a surefire way to give to mediocre organizations. Overhead costs are necessary for most charities to be healthy and productive. Do you really want to give to charities that skimp on things like modern computer systems, staff training and program evaluations? Me neither -- a good infrastructure can help charities become more effective. Don't be fooled by charity rating agencies that give top ratings to those with low overhead, without regard to the quality of their programs.

Don't limit your giving to just helping people like you.

Many people are most generous with charities that help people who have something in common with them: They give to the universities they attended, the churches where they worship, the medical causes that have touched their lives, or the homeless shelters in their hometown. This may be a good strategy if your primary goal is to help people like you, but it is probably not the best approach if you want to do the most good for the most people. A better approach is to be open to a broader set of causes and charities.

Give to organizations that provide effective solutions efficiently.

Many nonprofits actually brag about how inefficient their solutions are, and donors often respond by giving more. For example, private universities tell prospective donors how expensive they are when asking for scholarship funds. Hospitals often remind donors how costly health care is in America. Is spending $250,000 per person for a four-year degree, or $7,000 daily per patient, really the best use of donor money? Certainly private universities and hospitals do good work, but the fact that their solutions are so expensive lowers means that the same donation might achieve a lot more good with an organization that can achieve results at a lower cost (we'll give some examples later).

Give to people in distant countries.

This advice surprises and even offends many people, as we still have plenty of problems right here in America. However, there can be no denying that we are one of the wealthiest countries in the world, and many countries have much more desperate problems. We have virtually eradicated diseases like malaria and tuberculosis, nearly every American has access to clean drinking water and we have a literacy rate approaching 100 percent. This wasn't always the case, but we solved these problems decades ago, so the solutions are known, effective and cheap -- for example, it is much cheaper to save lives by distributing mosquito nets in Africa to prevent malaria, than to provide chemotherapy to cure cancer. The issue is not whether donors want to help people in America versus in other countries, but that giving money to the poorest countries in the world can achieve more dramatic results.

Prefer development over disaster relief.

The victims of disasters like typhoons, earthquakes, tsunamis and hurricanes are among the most needy people in the world. However, it's important for donors to keep in mind that 18,000 children die every day of preventable causes -- mostly a lack of nutrition and basic medical care in poor countries. While it would be wonderful if there were enough resources to fulfill all the needs of both development and disaster relief, that isn't the case, so priorities must be set and tradeoffs must be made. Major disasters often get so much media attention that they receive more donations than can be utilized effectively, and it is extremely difficult to help people in those areas because the local roads and other infrastructure is often destroyed. In contrast, many programs designed to reduce the preventable-cause deaths are already up and running efficiently, and ready to be expanded with more donor funds. Is it heartless to not contribute to disaster relief efforts? Maybe, but I think it is less heartless than to ignore the daily 18,000.

Give to charities that demonstrate proven results.

I am continually amazed at how many donors fail to ask charities for evidence that their programs work. Take a look at fundraising material for just about any charity. You'll often see stories about individuals who benefited from their programs or descriptions of what the charities did, but not reliable evidence of results. A homeless shelter may have a hundred participants in its return-to-work program, and can show you a profile of one successful participant, but that doesn't mean the program is very good. Such weak evidence is one reason why many people -- including me -- are skeptical of most charities. Luckily, new resources are emerging for donors looking for more rigorous ways to assess evidence. Specifically, charity evaluators, such as Innovations for Poverty Action and GiveWell are helping donors identify the best ways to allocate their giving.

Think critically.

Being an effective donor is about relying on your heart, as well as your head, to help others. Though many of these tips challenge the norms, that's exactly what is needed for donors who are passionate about maximizing the good that comes from their giving. The challenge for donors can be summarized by quoting Aristotle:

To give money away is an easy matter and in anyone's power. But to decide to whom to give it, and how large, and when, and for what purpose and how, is neither in every man's power nor an easy matter.