Money folded into a heart to represent donating to charity.

Donating Money 101

Of all the ways we spend money as Americans, the most self-gratifying way is to give to charity. It’s also super helpful to people in need, which is always a plus.

America leads all other nations in charitable giving, and a surprisingly small fraction of the money donated comes from large organizations. The majority of money donated in the US each year comes from individuals or households. Each day, average Americans pour in donations of all sizes, whatever they can spare to give, to contribute to causes they support. Donations to qualified organizations can even earn citizens tax breaks or deductions. Now, what are you waiting for? It’s time to get all charitable up in here.

So, the first thing you need to do is pick an organization you’d like to support. You may have no idea what to support, which is fine. You may have already picked a charity you know and love, which is also fine. In either case, you should still do some research. A staggering percentage of Americans donate with little or no insight into how well their chosen charity uses the money received through donations.

So, either through viewing the charity’s website or reading secondhand reports on the organization’s efficacy, you should try to determine how effectively the charity uses the donations it receives. You may not want to donate to a campaign if you learn that 70% of its donations are spent on advertising or that the projects it invests in are otherwise ineffective. Organizations like Charity Navigator help those looking to donate by providing resources on different charities and their track records.

The next step, if you’re serious, is laying out a plan to maximize your giving. Deciding early to set aside a small portion of each paycheck for your charity is an easy way to get into the routine of giving. It’s easy to get behind or neglect donations, but if you get in the habit of setting aside a bit of money, soon you won’t forget or even miss the money at all. If you’re really serious, you could begin setting more aside to your estate so that you can leave a portion of it to your charity after you pass. That’s planning pretty far in advance, but if you want to aid the organization and all those it helps, this is the best way.

The remaining considerations should be exemptions. The IRS’s website has a rather lengthy checklist of requirements that must be met before charitable giving can be claimed as a deduction. These deal with not only the organization donated to, but also the amount donated. As the requirements are stringent, getting a tax break shouldn’t be the main reason you donate. It’s possible, but not everyone will earn one. The most important reason to donate is the good that can come of it.

And the self-gratification. Don’t forget about that.

Last Updated: February 17, 2015