How to make more impact with your donations

02 November 2018

5 minute read

Supporting good causes financially is admirable, but are you making smart donations?

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

This growing generosity is admirable, but is that money being well spent? Are we giving in a way that maximises the impact of our donation?

The fact that most people would say that they just don’t know should be a concern.

Competition for your money is fierce with the UK having about 168,000 registered charities with a combined annual income of £75.35bn2.

High-profile scandals have hit headlines over the past few years which have knocked some donors’ faith in the charity sector3.

In fact, less than 50% of Brits claim to trust non-governmental organisations4, but few want to stop supporting good causes, or even to give less.

This is where smart giving comes in.

If you just want to be sure that every penny of your money counts you need to think differently about how you support good causes. Here are five ways to do that.

1. Think with your head, more than your heart

The choice to support a good cause is a financial decision as you’re deciding whether to give your money to one organisation over another. Smart financial decisions shouldn’t be emotionally driven so it’s important to take a step back before handing over a donation.

This is not always easy. Charities are well-practised in tugging at people’s heart strings. They often employ sophisticated campaigning techniques and well-produced media content to provoke an emotional response.

This does not suggest the cause they’re fundraising for isn’t deserving – it just means that you need to keep a cool head. Is this where your money will have the most impact? Look beyond the slick marketing - is this charity going to use your money well?

2. Pick a charity that personally appeals to you

What issues matter most to you? Think hard about this because there’s an almost endless list of charities and good causes, most being equally deserving, so prioritise the issues you that feel are the important to you.

Once you have decided on the type of charity you want to support, don’t just give money to the first one that appears in your search results. In any given area, it’s likely that several charities will be active, each with different approaches or with a slightly different focus.

Take your time to decide which organisation suits you best – you certainly don’t need to rush into a commitment and it would be advisable to do some research to be sure that a charity really matches your giving objectives.

3. Examine their work

Either with a particular charity in mind or a shortlist of organisations, you can begin to look into the details.

Start with the organisation’s website. A well-run charity should communicate its mission and purpose clearly and simply. Any charity that isn’t able to clearly articulate what it’s doing and why probably doesn’t have a clear idea of that vision itself.

It’s also important that the organisation stands up to necessary governance checks. For example, it should publish an annual report and give information such as who is on its board of trustees. It should also disclose who the key staff members are and how you can contact them. A lack of disclosure in these simple areas should concern you.

If you’re thinking about donating to any charity, don’t be afraid to phone them. You can tell a lot about an organization and how well it is run by the way it handles your enquiries and engages with you as a potential donor.

4. Follow your money

It’s important to be sure your money will be wisely spent, with as much as possible being used to support their cause. Therefore, it’s perfectly reasonable to carry out some due diligence on your chosen charity’s finances as these should always be robust, regardless of how small they are.

The charity’s financial accounts should be up-to-date and, if required, reported to the Charity Commission. Are they managing to increase their funding over time? Are they managing to costs under control? Do they depend too much on a small group of funders? If so, donor withdrawal could cause serious problems, so look for organizations with a donor base that is well-diversified?

The size of a charity’s reserves can also be revealing. They should save enough to cover its operations for up to six months in the event of a funding crisis, but not have reserves that are too large.

5. Consider the impact

Lastly, question the amount of difference the charity is actually making. Monitoring and measuring the impact of its work will be a priority for any charity that is serious about being effective, and the results of its analysis should be published. Has this information been made easy to find? Does it publish data regularly and is it in a format that is meaningful and easy to understand?

If the charity passes this first test, you’ll have the information you need to decide whether it provides you with an effective way to support a good cause. Will every penny of your donation have the impact you hope for?

Smart giving is a mix of science with love. A smart giver will believe that their time, talent and hard-earned money are important social investments.

Mixing science with love

The best way to learn more about philanthropy is to learn from other, more experienced philanthropists.

As a philanthropist, there are plenty of events you can attend that are specifically tailored to deepen your understanding of all aspects of giving and connect you to like-minded individuals.

Please contact us if you have any questions.