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How To Give To Charity Effectively And Efficiently

Dec 24, 2016 | 7 comments

When I first went to university someone I respected suggested I should start donating to charity from my student loan. Nonsense, obviously I wasn’t going to do that.

And I think that was the last time anyone I trusted spoke to me about giving to charity. Talking about how much we give and comparing charities is just not something we do in polite society.

The thing is, the evidence suggests that we truly care about other people and want to do good. A recent study showed that about 55% of adults in the UK donate money to charity in any given month[1]. But how much of those donations do you think were thoroughly researched? And how many do you think just donated the charity that shouted the loudest about a cause the giver cared about?

I’m not hating on charity advertising. I get it. It’s better to grow the pie than grow the slice. But as someone who has a set amount of money to give each year, I want to make sure that my money does the most amount of good possible.

I feel like I should have been taught how to give to charity effectively and efficiently at school, but I wasn’t. So over the last year, I’ve spent quite a bit of time researching just that.

This isn’t a how-to guide. Just the results of my personal research. I hope that at the very least it will get you thinking.

Not All Charities Are Created Equal

It makes sense to me that some charities are tens if not hundreds of times more effective than others. In fact, there are some charities with such bad track records that I am not sure how they can possibly be legal.

It is common practice that charities will hire for-profit companies to drum up the donations in their name.

Which I suppose I don’t have a problem with, provided that the majority of money goes to the charity. Watchdog groups say no more than 35% of donations should go to these companies. But some charities pay as much as 90% of donations to the for-profit companies [2].

effective-charity-giving

If you want to be horrified, delve into that link a bit more. During the research, I found many cases where the for-profit solicitation companies were run by relatives of the charity directors.

Those charities are getting very close to being scams.

But even for charities that have their heart in the right place, we need to look into what they are spending money on. And if they are spending their money on ‘right stuff’, is it actually doing any good?

Just because a charity has a good name and a heart-wrenching advert, doesn’t mean you should definitely donate to it.

Finding The Best Charities

Luckily I am not the only one who wanted to look into this further. One site I found myself constantly going back to was givewell.org.

GiveWell is a nonprofit dedicated to finding outstanding giving opportunities and publishing the full details of our analysis to help donors decide where to give.

GiveWell takes a very analytical approach to finding the best charity. They look into stuff like the ‘cost per life saved’ and ‘cost per total economic benefit to others’ and then rank all the charities based on which one does the most ‘good’ per dollar spent.

To get GiveWell recommendation, the charity needs to have robust evidence that what they are doing is actually working.

The top rated charity in 2016 was the Against Malaria Foundation (AMF). They simply distribute cheap mosquito nets throughout Africa.

GiveWell estimates that for roughly every $3,500 donated to AMF they will save one life. That is pretty amazing and is backed up with detailed peer-reviewed evidence.

Check out GiveWell’s top charity recommendations here.

The Life You Can Save is another good website that was created by Peter Singer, one of the founders of the effective altruism movement. It has a calculator that helps to visualise the result of your donation:

impact-of-money

 

If you don’t have a preference over different causes, then GiveWell suggests splitting your donation 75% to the Against Malaria Foundation and 25% to the Schistosomiasis Control Initiative,

I do have a few issues with GiveWell. Their approach is almost overly analytical, which can be a problem when comparing charities with very different aims. How can you compare the value of spending $5 on a mosquito net to spending $5 on research into malaria vaccinations? Research is by definition high risk. Your dollar might be spent on investigating a solution that turns out not to work.

This means that GiveWell’s recommendations are all charities that have direct results (mosquito nets, deworming drugs, cataracts surgery, etc) and don’t address the route causes.

Another side effect of this analytical approach is that the charities that rise to the top are focused solely on developing countries. Because that is where a dollar goes the furthest.

Well rightly or wrong, I care more about issues in the UK than I do about issues in a country I have never been to. And I also care more about certain causes than others.

Finding Good Local Charities

My personal top issues are homelessness, domestic abuse and dementia. That’s not to say that other issues aren’t important, it’s just that those are my top three personal focus.

So I started looking into charities here in the UK that focused on those particular issues.

It was tough. I couldn’t find any analysis and evidence that is as detailed as that provided by GiveWell.

Most charities have detailed research into the need that they are tackling. For instance, how many children die each year from bad water. But don’t do much research into how well their chosen solution is working.

It was quite easy to find what percentage of donations are spent on administration, but that isn’t particularly useful. I am looking for the most effective charities, not the most frugal. In fact, some evidence even suggests that the best charities spend more on admin than less effective ones [3].

There also seems to be a hesitation to compare charities. In London alone, there are over 2,000 organisations targeting homelessness, but no one seems willing to say which ones deserves or needs my money the most.

I probably spent way too long researching different charities and looking into their financials. Before coming to the conclusion I wasn’t qualified enough to really judge.

I was very keen to avoid ‘bad’ charities. So I ending up going with some of the biggest names in each sector that have won awards for being ‘good’. I am sure they probably aren’t the best and I expect they have serious issues with bureaucracy, but it’s the best I could do for now.

The most prestigious charity awards in the UK:

These were the charities I picked to support:

These aren’t set in stone and will probably change as I learn more about each one. But for now, it’s a start.

My Giving Breakdown

That’s all great. But how on earth do I split between those charities and the ones suggested by GiveWell?

I also have friends who work for charities or friends who have been supported by charities which I would like to contribute to. I also want to support my church and Christian mission. But how can I possibly compare them in effectiveness to the ‘best charities in the world’?

The more I looked into things, the more overwhelmed I got by the number of choices. I found myself delaying giving anything because I wanted to get that giving right.

So to make things easier and based on the idea that any action is better no action, I went for a straightforward split.

giving-breakdown-pie-chart

1/3rd to the top charities from GiveWell. 1/3 to the good charities I found in my personal research (Shelter, Refuge, Alzheimer’s society, etc). And 1/3rd to causes I am directly linked with.

How To Donate

Ok, so now I’ve worked out who I want to donate to, and how much. Now how exactly do I go about giving them money?

There are a lot of portals out there for managing donations. But it is often quite hard to find out exactly what the fees and processing costs are. And once again, quite a lot of them are for-profit companies. Did you know that JustGiving is a for-profit site? (if you’re looking for a site to do fundraising on, MyDonate operated by BT will see the highest proportion of donations going to the nominated charity[4])

If you are an employee of a company then the best way to give regularly is through ‘payroll’ giving. It is tax efficient, comes directly out of your paycheck and some companies even match any employees donations. Ask your HR department if they have a scheme set up and what additional benefits there are.

If you are unemployed or can’t donate through the payroll scheme, the next best way is a direct donation to the charity. Most charities have the details on how to do that on their website.

Remember to claim Gift Aid

Gift Aid is a scheme introduced by the UK government to support charities. It allows registered charities to reclaim income tax in order to boost the value of donations made.

This means that if you donate £1,000, the charity will actually receive £1,250 by claiming back on Gift Aid.

On top of that, if you are a higher income taxpayer, you can reclaim the difference between the 20% Gift Aid rate the charity receives and the tax you paid.

So if you are a 50% tax payer and you gave a £1,000 donation to charity. The charity would receive £1,250 and you can claim back on your tax return another £375.

Here’s the government page on Gift Aid which does a much better job of explaining it than I do.

Get To It

Perhaps the thing I realised most from my research, is just how much choice and how many good worthy causes there are out there. Doing your own research and finding a good charity is important, but it can become a never-ending search and stop you from acting.

As the saying goes “perfect is the enemy of good”, so get to it and start giving.

Good Resources