Many of us keep our thinking about investing and charitable giving separate. We look for companies in which to invest and seek characteristics such as high returns on equity and profitability. We drool over Microsoft's
Spend some time learning about sensible giving, and you'll get more bang for your charity buck.
For starters, think about that common metric we donors often look at -- what percentage of a charity's donations is spent on actual program work vs. fundraising and administration. It's true that in general, the higher the number, the better. But there are other ways of looking at it -- such as the inescapable fact that administration isn't costless. Light bulbs and salaries are necessary expenses. Now, imagine giving $100 to each of two charities. Charity A might spend $95 on its program work and $5 on fund-raising. Charity B might spend $90 on program work and $10 on fund-raising. Charity A looks much better, right? Well, if you do more digging, perhaps by asking the organizations some questions, you might learn that for every dollar Charity A spends on fund-raising, it takes in $2, while Charity B takes in $6 for every dollar it spends on fundraising. All of a sudden, Charity B should look more attractive. Don't begrudge an organization its fund-raising efforts if they're productive.
Next, think about the organization's program work. How effective is it? In our annual Foolanthropy charity drive, we're raising money for five compelling organizations. One of the five is First Book, which gives children from low-income families the opportunity to read and own their first new books. Get a load of this little detail: "98% of First Book's expenses go to programmatic costs, directly serving the mission. First Book collaborates with private and nonprofit partners and has developed a powerful network of strategic relationships. As a result of First Book's established infrastructure, productive national partnerships, and high efficiency, every $1 contributed to First Book results in $11 worth of books in the hands of the children who need them the most." Pretty impressive, eh?
Trust me -- they're all fascinating organizations. I urge you at least to read about them. You might consider contributing something, too. When you learn the scope of their dreams and achievements, you may even find yourself holding your stock investments to higher standards.
Share any Foolanthropic thoughts on our Foolanthropy discussion board, or just drop in to see what others are saying.
Longtime Fool contributor Selena Maranjian owns shares of Microsoft.
