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Donations to Rural Classrooms Worth Twice as Much

by Flexo on August 5, 2009

in Charity

A few years ago, the personal finance blogging community came together to create the pfblogs.org Financial Literacy Challenge through DonorsChoose.org, a charity that facilitates funding for classroom projects needing money. The challenge was designed for bloggers to encourage their readers to provide tax-deductible donations through DonorsChoose.org to fund classroom projects focusing on increasing financial knowledge.

The Bill & Melinda Gates Foundation is issuing a similar challenge. The foundation with fund 50% of any classroom project that prepares students in rural and high-poverty communities for college if the remainder is funded by individual donors.

You can browse the classroom projects eligible for the matching contributions from the foundation. There are hundreds of projects available so it is very likely that at least one will focus on aspects of education you find important.

The classroom projects are not expensive and DonorsChoose.org monitors every step of the process to ensure the teachers requesting the funds use the money properly, effectively, and efficiently. For just a few hundred dollars, you can fund a project. And with the guarantee offered by the Bill & Melinda Gates Foundation, your money will go much further.

Working with DonorsChoose.org was a great experience. The organization kept me informed and I received a package from the teachers and students I helped with photographs and personal notes thanking me for helping their projects become a reality. I strongly encourage anyone who believes the education of children is an important piece of a modern society to take any opportunity to help school programs that are grossly underfunded and in need of assistance.

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Charitable Giving: A Case of Bad Market Timing

by Flexo on September 24, 2008

in Charity

I made a mistake, and I should have known better.

Last year, I struggled with coming up with a needy non-profit organization that I felt I should support through charitable giving. The indecision stems from the desire to contribute to an organization with a mission that reflected one of my passions and the lack of quality non-profits that fill that niche. By the end of the year, I decided to provide money to the Fidelity Charitable Gift Fund, which would allow me to distribute or grant my funds to the recipients I choose at a later date.

I invested these funds like I normally do. With the $5,000 I provided to fund my “mini-foundation” in December 2007, I invested in a broad market index fund. Considering I intended to use these funds, or at least a portion of these funds, throughout 2008, I shouldn’t have chosen to invest in the stock market. I should have left the money in a money market account within the Charitable Gift Fund. The account would have grown to about $5,200 by the end of December 2008 if left alone.

At this time, the account’s value is a little over $4,000, having lost about 20% so far this year. That’s $1,000 less that I have to donate to a worthy organization because I couldn’t find the right match — possibly a procrastination — and because I invested without considering my time horizon for these particular funds.

Now I feel as if I need to leave the money in there until the market recovers its losses from the last year, but it could be a long time before the index fund increases 25% from today. My goal before the end of the year is to finally select an organization worthy of my continued support and pay them directly from my available cash rather than from the Charitable Gift Fund. I’ll also continue to contribute to the Fund but I’ll set some funds aside for short-term charitable giving in addition to continuing to invest in the stock market index fund for longer-term growth.

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The Envelope at Work: Do You Give (In)?

by Flexo on August 8, 2008

in Career and Work

Perhaps you have seen this. It may take the form of a manila folder containing a list of names on the front and a card and an envelope in side. Some of the names have been crossed off and perhaps even there’s a dollar amount written beside those. The card has is a generic “get well soon” message on the front and is signed by your co-workers, many with just-as-generic wishes like, “Get well soon! Hope to see you back.” The envelope has money contributed by your co-workers, and you’re next on the list.

In the past few months in my office, we’ve had numerous employees on medical leave, baby showers, and other random parties, all which seem to require a donation of some type. This has always been fairly common, but the volume has increase lately. I always participate, but I’m starting to grow weary. If someone chooses to have elective cosmetic surgery, do they still need recovery gifts?

Do you participate in these giving rituals? If you do, are you motivated by guilt at all?

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Maimonides’ 8 Levels of Charity

by Flexo on May 15, 2008

in Charity

In researching historical and religious views on charitable giving, I came across Maimonides’ hierarchy. He believed that there are 8 degrees of charity. These deal primarily with providing for the poor. Here are his 8 levels, from the highest to lowest. Do you agree with this assessment? How high are you on the list?

  1. Investing in a poor person in a manner that they can become self-sufficient.
  2. Giving to the poor without knowledge of the recipient and without allowing the recipient to know your identity.
  3. Giving to the poor with knowledge of the recipient but without allowing the recipient to know your identity (anonymous giving).
  4. Giving to the poor without knowledge of the recipient but allowing the recipient to know your identity.
  5. Giving to the poor without or before being asked.
  6. Giving to the poor after being asked.
  7. Giving to the poor happily but inadequately.
  8. Giving to the poor unwillingly.

What do you think?

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More Children are Budding Philanthropists

by Flexo on January 3, 2008

in Charity

I’ve had charity on my mind lately, and it seems to be affecting what I write about. During my normal reading, I came across a Washington Post article about what is apparently an increase in philanthropy among teenagers and younger children.

Young children and teenagers across the nation are getting involved in philanthropy more than ever, according to research and nonprofit experts, who credit new technologies with the rise of the trend. As young people increasingly become exposed to and connected with the problems of the world via the Internet and television, experts said, parents are finding new ways to instill in their children the value of giving. At the same time, technology is democratizing philanthropy so giving is not only easier for people of all ages and means, but also trendier. And children are starting to organize at the grass-roots level to give…

The scale of money children are raising through new technologies or giving away through charities is “mind-boggling,” said Lucy Bernholz, founder and president of Blueprint Research and Design, a leading consulting firm for nonprofit organizations. “It used to be the pennies we raised through UNICEF boxes, and now you’re talking about 15- and 17-year-old children who are savvy enough and committed enough to raise tens of thousands of dollars and sending it halfway around the world,” Bernholz said.

unicefThe article contains many examples of teenagers and children who are outpacing my own giving. According to the research, much of this increase in giving is driven by affluent families who include children in their charity decisions. Philanthropy isn’t just for the affluent, as I’ve discovered lately. In just the Fidelity Charitable Gift Fund, the pool of donors recommended over $1 billion in grants to charities last year. As I’ve written about recently, this type of fund gives smaller-time investors and “thousandaires” like me access to some of the benefits that millionaires have when they create and administer foundations.

I don’t remember knowing much about philanthropy when I was a pre-teenager. I was certainly aware of global issues; Live Aid was a major force back then. I didn’t see myself in a position to support the causes other than buying memorabilia for which proceeds went to support various charities. Thanks to technology, more opportunities for giving are available to more people.

image credit: zugaldia
For Modern Kids, ‘Philanthropy’ Is No Grown-Up Word [Washington Post]
Gift Fund Donors Set Record for Giving in 2007 [Fidelity]

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Small-Time Philanthropy: The Charitable Gift Fund

by Flexo on December 27, 2007

in Charity

Last week, I mentioned I met my goal for charitable giving for 2007. The modest goal, which I set for myself at the end of last year, was to provide $1,000 in support of an organization meaningful to me. This year, I decided to separate myself further from the organization I normally support, which also happens to be a former employer. It’s not that I don’t believe in what they do, but I have some issues with their methods.

I want to make sure my money helps an organization reach its stated goal, and I will only give to an organization whose goals, mission statement, and vision match my own values. In addition, it helps to have a strong knowledge of the inner workings of the organization. Unfortunately, it’s this strong knowledge that has turned away from the group I formerly supported.

This past year, I’ve had difficulty coming up with a replacement besides the pfblogs.org Financial Literacy Challenge. This has been a frustration for me, particularly because I wouldn’t mind managing an arts education foundation of some sort. While researching methods for starting a foundation — an endeavor better attempted by someone with millions of dollars ready to be dedicated and willingness to spend a lot of money just to run the foundation — I came across the idea of the charitable gift fund.

The charitable gift fund allows me to make a contribution to a general fund now without specifying a direct recipient. That also allows me to take a tax deduction for the contribution this year while taking my time to decide where the money should go. In the mean time, the funds are invested and presumably appreciated along with the rest of the stock market.

band concertCharitable gift funds, or more specifically donor-advised funds, are organized by several brokerages and public charities. I chose the Fidelity Charitable Gift Fund thanks to its low barrier of entry (only $5,000 to open an account and subsequent investments must be at least $1,000) and its relatively low fees (0.6% including the underlying expense ratios, with a minimum of $100).

In return for the ability to take the tax deduction now, I give up my ability to manage and distribute the funds directly. However, I can recommend grants to charities as long as they are registered under regulation 401(c)3, and therefore legal non-profit entities. It would be very rare for Fidelity or any other custodian to reject a donee suggested by the donor as long as the organizations are not-for-profit and the donor doesn’t directly benefit from the organization’s receipt of the funds.

When I sent in my $5,000 to establish my donor-advised fund, I selected to invest the money in Fidelity’s Spartan 500 Index Fund (FSMKX), which carries an expense ratio of 0.1%. I could have transferred securities or other assets to the fund, but I opted to send cash. Unfortunately, they don’t support ACH transfers, so I had to write a check. A wire would have cost extra money.

Now that the fund is established, I can suggest grants at any time in amounts of $100 or more. The $5,000 I sent to the Fidelity Charitable Gift Fund is irrevocable, so it can only be used for charity. I’ve surpassed my “stretch goal” of $2,000 for 2007. In the process of establishing the fund, I sort of circumvented the most important part, getting that money into the hands of organizations for their use towards their missions. However, I’ve ensured that once I select recipients I will be contributing more than I would have otherwise.

If you’re interested in starting your own philanthropic endeavors through a charitable gift fund, here are some resources to get you started.

photo credit: johntrainor

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3 Things You Need to Know Before Giving to Charity

by Flexo on November 20, 2007

in Charity

This is a guest post from Steve, who writes about finance and life at Brip Blap.

As the holiday season approaches, calls for donating to charity begin to multiply. Americans donate over $240 billion per year to various charities, and that’s simply in terms of money; the contributions in goods and services add even more to that number. This is a brief guide to the biggest questions about charitable giving in the US.

Decide what’s right for you. First of all, you need to come up with an idea of the type of charity you want to support. The list is almost endless. There are small local charities that benefit a very specific area, and there are gigantic global charities that help around the world. There are charities that try to offer direct help, and those that try to raise awareness. A few things you should consider before deciding on a charity:

# Is it a “good” charity?
# How will you contribute?
# Will you receive a tax deduction?

Is it a “good” charity? Make sure you agree with the charity’s stated aims. Try to understand what percentage of your contributions will go where you think they need to go. The IRS has a Form 990, “Return of Organization Exempt From Income Tax.” This form is probably your single best piece of information about a charity, because it’s the way the government prevents abuse of tax-exempt status.

There are almost 2 million American charities; specifically you should seek out “qualified organizations.” A qualified organization is called that because it qualifies for a tax deduction. These organizations include religious groups, public schools, not-for-profit hospitals, parks and a variety of other groups. If the organization is not qualified there is no barrier to giving to that group, but your donation will not be deductible.

You can view a charitable organization’s Form 990 to find out more about that organization’s mission and programs. The IRS Form 990, “Return of Organization Exempt From Income Tax,” can be thought of as the financial statements of a nonprofit organization. The form gives information about the organization’s finances and how money collected is spent. Keep in mind that although some groups may spend more on overhead than others, that does not necessarily disqualify a group from your consideration. Larger nonprofits may have more expenses for outreach or large, multi-year projects. If you have any concerns about how the money is being spent, you should contact the organization and ask them for more information; if they won’t provide it, that’s a good indicator!

Resources:
* Guidestar
* Charity Navigator
* IRS Form 990 [pdf]

How will you contribute? There are three basic ways to contribute to charity: money, goods and time. All three have value, and you should never let yourself feel badly because you can give one way and not another. A busy traveling salesman may not have the time to work hands-on with a charity group, but he can donate money or goods. A college student may not have extra cash or goods but can certainly contribute time. Everyone can give something:

* Give money. Obviously this is the simplest way to contribute, and usually it can be done quickly by going to a web site or mailing a letter. Many charities struggle to raise money, and every little bit counts.
* Give goods. You may think that old, gently worn coat will never been worn again, but there are plenty of organizations who would be thrilled to give that coat to someone who needs it. Clothes, books, almost anything that is in decent condition can be given to worthwhile organizations like the Salvation Army.
* Give time. A lot of people give money and goods to charitable organizations, but many of them need the gift of your time more than anything. From answering phones to building houses, many organizations deeply appreciate the time you can give them to help them spread their message or even complete their core missions. You can even under certain circumstances donate your professional services to an organization.

Will you receive a tax deduction? Some people may think that it’s improper to discuss tax writeoffs when talking about giving. The US government has chosen to create an incentive to giving, though, and there’s no reason not to take advantage of it. Of course, if you can only really receive the benefit of these deductions if you itemize. If you give money or other gifts (stocks, goods, etc.) and the charity has the proper Internal Revenue Service (IRS) status, you may be eligible to deduct some or all of your contributions. The rules have been significantly tightened in 2007, however. A few basic pointers:

* Starting in 2007, you need a receipt for ANY donation. The old limit of $250 has been eliminated, so even a $10 bill in the collection plate requires a receipt if you want to deduct it.
* You may deduct up to 50% of your adjusted gross income in one year for charitable donations (certain contributions, though, may have lower limits).
* If you give more than 50%, you can carry the excess forward for up to five years.
* If you donate goods to an organization, it must be in good condition or better in order to be deductible – and if it’s worth more than $500 you have to get a professional appraisal to prove its value.
* If you receive something in return for your donation, you can only deduct the excess of your donation over what you received; so if you paid $100 for a charity dinner with a value of $30, you can only deduct $70.

Your best resource for figuring out the rules? Go to the source: Publication 526 from the IRS website. (This is the 2006 version; 2007 is not yet available.) If you have any concerns, make sure you talk to a tax professional about your specific situation.

While there are a lot of rules surrounding the deductibility of donations and a lot of suspicion over some recent charity scandals, it is important to remember that the great majority of charitable organizations exist for one reason: to help. As the holidays come, it’s important to remember those less fortunate, and extend what help you can. You can even be a little selfish, because one of the biggest benefits of giving is that you’ll feel great about doing it!

Read more from Steve at his blog, Brip Blap.

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