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5 ways to be a smart giver

5 ways to be a smart giver

Britons are generous. Some 60% of people in the UK made at least one charitable donation last year, collectively handing over £10.3bn to good causes1, more money than ever before.

But while such generosity  is admirable, are we giving smartly? Is that money being well spent and in a way that maximises the impact of our donation?

The honest answer for many of us may be that we just don’t know. And that should worry us. The UK now has 168,000 registered charities with a combined annual income of £75.35bn2. Competition for your money in this marketplace is fierce, but some charities are more effective than others. Meanwhile, a series of mishaps and scandals over the past few years has eroded some donors’ faith in the third sector3. Less than half of Britons now say they trust non-governmental organisations4.

Few people want to stop giving to good causes, or even to give less; they just want to be sure that every penny of their money counts. That means being smarter about how they support good causes. Here are five ways to do just that.

1. When choosing a good cause, try to limit the emotion

Giving to a good cause is a financial decision: you’re making a choice to give some of your money to one organisation rather than another. Smart financial decisions should be made with your head rather than your heart, so take a step back before you hand over your donation.

This can be harder than it sounds. Charities understand that an emotional pull can be very effective. They’re well-practised in tugging at people’s heart strings, often employing sophisticated campaigning techniques and well-produced media content.

None of which is to suggest the causes for which they’re raising money are not deserving – just that you need to keep a cool head. Is this really where your money will have the most impact? And beyond the slick marketing, is the charity going to use your money well?

2. Pick a charity with an approach that appeals to you

Think hard about what matters most to you: the list of charities and good causes is almost endless, and most are just as deserving as each other, so you need to prioritise the issues that feel personally important.

Once you have a clear idea of the type of charity you’re looking for, don’t just donate to the first one that comes up on your search results. In any given area, it’s likely that several charities will be active, each with different approaches to the issue, or with a slightly different focus.

Take your time to work out which one suits you best – there is certainly no rush to make a commitment and you may need to spend time doing some research to be sure that a charity really matches your objectives for giving.

3. Take a close look at their work

With a particular charity in mind – or a shortlist of organisations – you can begin to drill down into the detail.

Start with the charity’s website: it should communicate clearly and simply what the organisation stands for – its mission and purpose. Any organisation that struggles to articulate what it’s doing and why probably doesn’t have a clear idea of that vision itself.

The charity should also stand up to basic governance checks. It should publish an annual report, for example, and offer information such as who sits on its board of trustees, who the key staff members are and how you can get in touch. A lack of clarity in these basic areas should ring alarm bells.

Don’t be afraid to call any charity to which you’re thinking about giving. Indeed, the way the organisation handles your requests for information and engages with you as a potential donor will tell you a great deal about its values and how well it’s run.

4. Follow the money

You need to be certain your money will be spent wisely, with as much of it as possible used to support their work . It’s therefore important to conduct some due diligence on their finances which should always be robust, no matter how small they are.

Check that the organisation’s financial accounts are up to date and lodged with the Charity Commission if they need to be. Are they managing to increase the amount of funding they raise each year and are they keeping costs under control? Are they overly dependent on a small group of funders, whose withdrawal could therefore cause serious problems, or do they have a well-diversified donor base?

The size of a charity’s reserves can sometimes be revealing. The organisation should maintain a rainy-day fund – enough to cover its operations for six months in the event of a funding crisis – but not overly large reserves.

5. Evaluate the impact

Finally, check out how much difference the charity is actually making. Monitoring and measuring the impact of its work will be a priority for any charity committed to operating effectively – and the results of this analysis should be published. Look at how easy the charity makes it to find information on the impact it’s having. Does it publish such data regularly – and in a format that is meaningful and easy to understand?

If the charity passes this first test, you’ll have the data you need to decide whether it offers the most effective way to donate. Will every penny of your donation going to have the impact you hope for?

Smart giving is a partnership between donors and charities - a blend of art and science and love. Smart givers should believe their time, talent and treasure are important social investments.

The world of philanthropy

The best way to discover more about the world of philanthropy is to learn from experts in the field and from other philanthropists.

As a client, you can attend events and roundtables that have been specifically tailored to deepen your understanding of all aspects of giving and connect you to like-minded individuals.

Our bespoke literature includes our Guide to Giving, which provides step-by-step advice and answers questions on all aspects of charitable giving.

We have recently published Future Giving – Engaging the Next Generation [PDF, 273KB] which we created in response to many conversations with our clients about how to involve their families in their giving. It gives guidance on how to help shape the world of philanthropy for ages 5-25 and includes two fascinating case studies.

We have also published Smart Giving – The Guide to Donating [PDF, 225KB]. This provides clients with advice and guidance before donating, so they can feel confident their donations will be well spent. It encourages those donating to charity (or raising money for charity) to seek information from the charity so they can understand how it works, how it’s run, and what impact it has.

Please contact us to find out more about this service. Our Philanthropy Service is centred on the United Kingdom and also directly available in Switzerland and Monaco. It may also be available in other regions following discussion with Barclays.