How Much of Your Donation Reaches Those in Need?

Most everyone has received those phone calls. You know the ones —they usually come in around dinnertime and ask you to donate to a well-regarded charity.

According to recent reports, Americans give almost $300 billion a year to charity. But how much of that reaches its intended destination? One determining factor is how the money is raised.

If funds are solicited over the phone, the charity may be using a telemarketing firm. A recent article in Bloomberg Markets states that some telemarketing firms keep an overwhelming 50% to 70% of the donations collected. Often, these callers falsely refer to themselves as volunteers. They often further mislead by saying that over 70% goes to the charity. That figure often refers to the total proportion of money that the charity raises, which supports programs, not the percent that they will receive from the telemarketing firm.

Sometimes the donor is asked not just to contribute but also to mail letters to neighbors asking them to help. These neighbor-to-neighbor campaigns are particularly notorious for their low pay-outs to the charity. Why do charities even use such firms? Many reason that “some money is better than none,” and they greatly value the new households “sold” by the telemarketer for future direct mail purposes.

Here are a few common-sense tips for donating so that as much as possible goes to the intended cause:

• Review the charity yourself

You can use Choosing a Charity or Charity Navigator, or review its annual financial report. Pay close attention to their overhead expense — ideally, it should be 25% or less.

• Consider making recurring payments directly to your favorite charity

In this way, you help them decrease their fundraising costs. Contact the charity directly to arrange direct payments from your bank account or credit card.

• Don’t commit to any donations over the phone

Ask the caller to send material about the organization or research the group or initiative on your own.

Your financial advisor can help you choose an appropriate charity based on your interests. He or she can counsel you on the best method — and timing — for making donations.

Marina Goodman is an investment strategist at Brinton Eaton, an SEC-registered wealth management firm, where she specializes in investment analysis, portfolio management, and tail risk hedging. She can be reached at (973) 984-3352.