Americans are among the most generous people on earth, yet we can be way too impulsive in our giving. Show us a photograph of a child with messy hair or an animal in a cage, and we tend to whip out our wallets. But that knee-jerk reaction isn't always the best idea. Some charities can do far more good with your donations than others.
Even a cursory check at sites such as Guidestar.org, CharityNavigator.org, or the Better Business Bureau may not tell you enough. Glancing at what percentage of donations get spent on actual program work, as opposed to administration or fundraising, still won't tell you the whole story.
It's all relative
Consider an organization's big picture. Huge charities may be more able to spend a larger share of their income on their work, thanks to economies of scale. A small outfit might not be able to get around spending a bigger chunk of its income paying its four workers.
In addition, sometimes it's smart from the charity's perspective to spend a bit more to get results. While a barrage of mailings from a charity seem wasteful and irritiating when it winds up in your mailbox, according to marketing consultants Russ Reid, campaigns that send 12-18 mailings per year are generally twice as profitable as those that send just three to six.
At CharityNavigator and elsewhere, you can see not only what percentage of an organization's revenue is spent on fundraising, but also how effective its efforts are. Many of the less productive fundraisers nevertheless manage to spend $0.25, if not a little less, for each dollar of donations they generate. While even that relatively high rate is cost-effective, you can do better. Plenty of organizations spend less than $0.10 or even $0.05 to bring in each dollar.
Finally, look at an organization from all sides. Is it doing work that's important to you? Is it achieving impressive results? Are its financials transparent and available? Is it solvent and growing?
Right now, The Motley Fool's annual Foolanthropy campaign is supporting the Thurgood Marshall Academy, an impressive charter school in a poverty-stricken part of our nation's capital. You want impressive results from your charities? A remarkable 100% of graduates from Thurgood Marshall have been accepted into college!
Join us as we support Thurgood Marshall Academy and its deserving students. Take a few minutes to learn about the school, then consider sending it a donation. Even if you're strapped for cash, you can still pitch in. For every comment you leave on a Fool article or message board through Jan. 7, we'll send the school $0.10, up to $20,000.
If you want to make every dollar count when you invest, shouldn't you strive for the same goal in your charitable giving? Careful research can make sure your money goes where it can do the most good.
Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article. Try any of our investing newsletter services free for 30 days. The Motley Fool is Fools writing for Fools.