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6 smart tips for charitable giving

Fifty percent of this year's charitable gifts will be made between now and the end of the year.  Financial editor Jean Chatzky shares advice to prevent fraud and make sure your hard-earned money (or time) is doing its best work.
/ Source: TODAY contributor

If this year is typical, 50 percent of all charitable gifts for 2007 will be made between today (the day after Thanksgiving) and the end of the year, according to In part, of course, because our hearts seem to be a little bit larger at this time of year. But it's also because this is the time of year we're asked to contribute — and when we make contributions, we want to be able to deduct on this year's tax return.

While we'd like to think giving to charity is as easy as writing a check or as simple as dropping off a bag of groceries at a food pantry, it's not. Not if you want to be sure your hard-earned money (or your hard-to-come-by time) is doing its best work. Here are some things you need to know to make smart charitable decisions.

Decide what your mission is
There are more than 1 million charities. You are better off giving more of your dollars to fewer causes. Why? Because it costs money just to get you to give. If you give just a little bit, chances are that money is just going to cover the cost of getting to you. If you dig a little deeper, chances are your dollars will start to make a real difference. But that means thinking about which charities mean something to you — not just those your friends are on the boards of, or those that happen to call or send you a letter. Decide what your mission is — whether you're trying to do something that helps locally or nationally or globally — and ask yourself, how quickly do you need to see a payoff, a result, in order to feel as if your money is accomplishing something.

"Too many people settle for a charity that 'kind of' does what they 'kind of' like," says Trent Stamp, president of Charity Navigator. Settling can be a waste of time for both you and the organization. To find charities that match with your mission, hit the Internet. Or, if you'd like to give locally, call the closest Community Foundation (there are 600 nationwide) and ask to talk to someone about organizations that are doing the work you're interested in. Often the best question you can ask one of these foundations is: Who or what needs my dollars the most?

Check the program ratio
When you decide where you're going to give — whether you give time or money — you want to give to an organization that will use your gift wisely. The longtime barometer of wise giving has been a number called "the program ratio," which is a measure of how much of your contribution to a charity actually goes to accomplishing its program or mission rather than to, say, administrative expenses and more fundraising. You can find this number on a variety of great charity Web sites including and and

In general, you want 75 to 80 percent to be the lowest acceptable number. But what we've learned recently is that you need to compare apples to apples. If you're looking at making a donation to a health charity, compare it to other health charities, compare museums to museums, and food banks to food banks. And note: If a charity is less than two years old, you should expect its program ratio to be abnormally low as it goes through the expensive process of getting into business. That's OK.

Use the Internet, wisely
When former President Bill Clinton was helping to raise money for victims of the tsunami and Hurricane Katrina, he learned — as he wrote in his new book, "Giving" — that with the power of the Internet everyone has the unprecedented ability to change the world. That's right. The Internet makes it easier to find your causes, to send your gifts, to be immediately responsive to brand-new and ever-changing needs. But you need to be careful. Do not automatically trust domain names just because they have a ".org" attached. Anyone can register for a Make sure the charity has a physical mailing address and a telephone number. And do not fall for "phishing" scams that come in your e-mail asking for donations but really looking for your personal information.

Give by shopping, buying, matching
Give by shopping, buying, matching and with stock. There are ways to give that you may not be considering. No matter what your cause is, chances are you can now buy a holiday gift that will contribute a portion of its sales to your cause — or a friend's. Something Red to fight AIDS in Africa. Something Pink to fight breast cancer. You can also give money by shopping through particular Web sites. — an aggregator of shopping sites, everyone from Red Envelope to Foot Locker and hundreds more — donates a portion of its sales to cancer research. If your employer matches all or a portion of your gift, don't forget to fill out the forms to take advantage of that. And this year, you may be sitting on some appreciated stocks. If you give those directly to the charity, you can maximize the charity's take, because a charity can sell the shares and not pay taxes on them, whereas you cannot.

Watch out for fraud
Unfortunately, when charitable giving is at its height, charitable fraud is as well. According to the Better Business Bureau: Legitimate charities do not demand donations; they willingly provide written information about their programs, finances or how donations are used; and they never insist you provide your credit card number, bank account number or any other personal information. Do not — do not! — give over the phone unless you placed the call or over the Internet unless you surfed to the site rather than the other way around. If you are in doubt about making a gift, think twice. Get full identification of the solicitor and review it. Take home the information a charity has provided you with, and use the Internet's tools to either check it out, or call your local BBB to be sure. Your dollars are too needed elsewhere to waste on an outfit that's an outright scam.

Volunteer with friends
The highest turnover rate in all the nonprofit world is that of volunteers. Nonprofit organizations can be supremely dysfunctional, so if you're going to make a commitment of any serious time or money, the group's mission has got to be in sync with your interests. Otherwise the hassles that come with volunteerism will snuff out your zeal.

I'm of the belief that anything you do with other people — preferably people you like and respect — has a greater chance of success than something you do alone. That's why I have running partners. I know I won't give in to my laziness or desire for another cup of coffee when a friend is waiting on the street corner.

If you're that sort of person, you may want to think about joining — or forming — a "giving circle" with friends or work associates who have an interest in the same cause you do. Besides making you feel accountable to other people, a giving circle lets you be a part of a group that can have much greater impact than you could on your own. And, of course, charities pay more attention to donors when they know there is more money that could come in.

Jean Chatzky is an editor-at-large at “Money” magazine and serves as AOL’s official Money Coach. She is the personal finance editor for NBC’s “Today” show and is also a columnist for “Life” magazine. She is the author of four books, including “Pay It Down! From Debt to Wealth on $10 a Day” (Portfolio, 2004). To find out more, visit her Web site, .