The same tough> economic times that lead charities to further extend a helping hand are also taking a major toll on their finances.
One-third of nonprofits report that contributions have declined this year even as demand for their services skyrockets, according to charity evaluator GuideStar. Half of these organizations expect a drop in income through the holiday season -- when the bulk of donations traditionally are made.
When recessions hit, charitable giving historically drops by about 1%, according to Giving USA, an industry group. "It's actually a huge drop," says Sandra Miniutti, a spokeswoman for Charity Navigator, which evaluates nonprofits' effectiveness, "and it really affects those nonprofits we typically associate with the word charity, like food banks and homeless shelters, which see more demand."
Compounding the nonprofits' financial woes: the stock market's wild ride. "Foundations can't even figure out what their portfolios are worth right now," says Kathleen McCarthy, director for the Center on Philanthropy and Civil Society at the City University of New York. As a result, many foundations are withdrawing funds from charitable endowments.
While similar financial pressures are weighing on individual donors as well, it doesn't mean they have to stop giving altogether just because times are tough. Here are seven ways to maximize a charitable donation and give more effectively.
Give to the neediest organizations. Charities helping people get by in this tough economy, such as food banks, homeless shelters and utility assistance programs, are getting hit the hardest by a double whammy of fewer donations and rising demand, says Miniutti. So if you want to make a real impact, give to one of these groups.
Go beyond cash. Donating your time or unwanted belongings can help charities a lot -- and it won't bust your budget, says McCarthy. Clean out the pantry of extra canned goods and other nonperishables, sort through closets for unwanted clothing that's still in good condition or volunteer your time or professional skills.
Use sites that offer matching donations. Sign up for a free charity portal, like iGive, which donates a percentage of every purchase you make with participating online retailers. All you have to do is go through the charity web site to link to and buy from the retailer's site. Buy $50 in over-the-counter medications and other household staples at Drugstore.com, and you'll generate an extra $2 for the nonprofit of your choice. (The site currently lists more than 24,000, but you can add any group with the IRS's 501(c)(3) status.)
Check financial records. With fewer charitable dollars in play, make sure you're giving to a nonprofit that puts more into its programs than its administrative costs. Both Charity Navigator and GuideStar assess nonprofits' financials, pointing users toward organizations that use their money more efficiently. Just make sure to compare charities with similar aims -- an animal shelter and a fine arts museum have very different expenses, says Sharon Kirk, a spokeswoman for GuideStar.
Seek reputable outfits. "What has the charity demonstrated that it does?" asks Peter Fissinger, president of Campbell & Company, a fundraising consultant. A reputable charity should offer hard numbers regarding the amount of aid distributed as well as, say, number of homes built or winter coats handed out.
Skip the middlemen. To make sure your entire donation goes where you want it, send money directly to the charity. Phone pledges typically go through for-profit telemarketing firms, which can take a cut of up to 50% of a pledge, cautions Miniutti. Pay with plastic, and the charity's cut is less the 2.5% merchant fee that card issuers charge.
Stay focused. To maximize the impact of your contributions, focus on just one or two charities, says McCarthy. Just don't be too specific about where the money goes, such as only to Project A. Earmarking your whole donation for a set cause can hurt -- the group might get enough to fund a project you endorse, but then they may not be able to pay the electric bill.