Five tips for effective charitable giving

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Was 2010 the year we stopped giving back? Maybe, according to an Angus-Reid poll that revealed nearly a third of Canadians didn’t give anything to charity in 2010. The sad thing is charities are more in need than ever – tough economic times mean that more communities are relying on them to provide important things like food, shelter and basic needs to the most vulnerable among us. But Canadians are also facing job insecurity and record high debt levels, so they’re cutting back on giving as a result. This is a big mistake not just from a societal point of view, but from a financial planning perspective too. Giving is good for the soul, but it’s also good for the bottom line. 2011 is a great year to kick-start your charitable side and maximize all the benefits that come with giving back.

Here are a few tips to get you started on a more generous 2011:

Try giving more money to fewer causes
From co-workers running/biking/walking for causes to local donation drives, you probably end up giving $15 or $20 here and there to different causes. It all adds up but it tends to be spread across a lot of difference charities. Consider donating more money to a smaller number of charities – $200 donated to a single organization can make a big difference.

Plan ahead
Determine how much you want to give and who you want to give it to ahead of time. The amount you donate is up to you, but a recent survey suggested Canadians could do a lot better. In 2008, we gave just 0.73 percent of our income to charities while Americans bested us by donating 1.38 percent of their income. I’ve read some experts that recommend up to 3 percent. Depending on how much you earn, that figure can be pretty high which makes it worth choosing your charity wisely and working donations into your overall financial plan for the year. 

Choose your charity wisely
You only have so much to give, but the good thing is there are more tools than ever to help you narrow the field and make the best choice for you. Start by making sure it’s registered – the Canada Revenue Agency maintains a searchable web page with all the registered charities in Canada. Another great way to make sure your donated dollars are being put to work is by scanning MoneySense's Charity 100 list – they give Canada’s top charitable organizations a letter grade from A to D, based on how they spend their money and in a few cases, how little money actually gets spent on programs! This is great news for donors who want to make sure their money really makes a difference to the people and programs that rely on these charities.

Make it easy
These days, it’s really easy to give money to the charity of your choice. You can even make a difference by tapping a few numbers into your cell phone. For example, last year in the wake of the Haiti earthquake, the Salvation Army put a "Text to Donate" program in place allowing cell phone users to donate $5 simply by texting 45678 on most major carriers. Another immediate option is CanadaHelps.org – you can donate to any registered charity in Canada through this one-stop website and it emails you a receipt immediately. You can even set up monthly donations if that’s your preference. It’s both quick and convenient.

Get the most on your tax return
You probably know that charitable donations are tax deductible, but did you know that the more you give, the more you get back from the Canada Revenue Agency? You get a 15 percent tax credit on donations of up to $200, but you get a 29 percent credit for amounts over that. And provincial tax credits take that number higher. Make sure you keep every receipt. Together, they could push you up over the $200 limit. And if you’re not able to make a big donation this year, consider saving those receipts for a year when they will total more than $200 – donations can be carried forward for five years. Or, if you have a spouse, combine your receipts and claim the donations on one of your tax returns to get the most money back.

Caroline Cakebread is a Toronto-based financial writer and editor. She’s also a recovering academic and the mother of two kids. Check out her personal finance blog for Chatelaine Your Money.