What is the Most Effective Way to Donate Money?

April 26, 2007

Do you ever wonder how much of the money you donate actually goes to the people that need it?

Overhead Costs
Companies that solicit contributions on behalf of charities get some type of payment for their services. A co-worker once told me that some of these organizations get a percentage of all the money they bring in. It seems it would provide a good incentive for the calling company, the more contributions they get, the more money they make. The problem is I’d like as much of the money I give to go directly where it’s needed instead of into the pockets of another company.

I asked this question of a phone rep working for a third party who was calling on behalf of Mercy Corps this week and never received a good answer. The longer the person on the other end of the line avoided answering the question, the more I realized it might be a mistake to pledge over the phone. I ended up saying I did not want to donate so his company wouldn’t take a cut. Instead I plan on taking my usual approach of donating directly to Mercy Corps.

Not only do I like the mission of Mercy Corps, I also like the fact that the organization works hard to keep overhead low so the money goes where it’s needed most. Mercy Corps includes a financial summary and balance sheet at the bottom of its annual report. They don’t have 2006 listed yet but in 2005, 11% of their spending was for administrative support.

I would like to see more detail provided here, for example how much do they pay third parties to fund raise for them or how much do they spend on mailers asking for donations. Since charitable organizations are making an effort to be as efficient as possible, I decided to come up with ways I could be more effective about donating.

How Can We Make Our Contributions More Effective?
1) Donate directly to cut out any middle men. I’ve donated via their website in the past but I should think about mailing in a personal check so they don’t have to pay credit card fees either.

2) Sign up for monthly giving. Often if you choose this option, the charitable organization will remove you from mail & call lists which will save them on promotional costs.

3) Donate what you pledge. If you speak with a representative of an organization and pledge a certain amount make sure you donate at least the amount you promised. From what I understand, some organizations allow for those pledges in the budget in some way. If many people give less than estimated it could cause problems with the planning the charity has done.

4) Use matching programs. Increasing the amount that is given is always more effective.

What are other ways we can be more effective with our donations?


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Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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8 Responses to What is the Most Effective Way to Donate Money?

  • Credit Card Offers

    Another great way is to donate something specific rather than money. I recently donated some ALCS tickets to Make a Wish. Gives you a good feeling to directly give to someone, rather than hand over cash to an organization, even if it is a good cause.

  • Credit Cards

    Sometimes we forget that the best way to donate to charity is via our time, then our money.

    Consider this, volunteer your time with a charity, get to know the work they do and the behind the scenes goings on. Then do some homework on where the funds are going…

    Point being that sometimes the best way to contribute is give of yourself. Money is not everything. Get out there, get involved.

    Most of the money that seemingly gets mis-appropriated is spent on paying for labor. Take the labor component out of the equation by giving your time. Something for you to ponder…

  • KMull

    Hmm, not sure I agree with the check thing. Depends on the non-profit. Some have to pay for people to open all of those envelopes and run to the bank. I know that is how it is with Campus Outreach.

  • anonymoustroll

    The most effective way to “donate” money, of course, is to spend it.

  • FMF

    I always check a charity out at Charity Navigator to make sure they aren’t spending a boatload on administrative costs.


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