This is part of The Globe and Mail's in-depth look at the evolution of philanthropy. Read more from the series here.
Every year, you give a portion of your earnings to charity. But how much thought do you give to where your money goes? Do your donations reflect your values? Or do you tend give to a mishmash of causes, from your co-worker's walkathon for animal shelters to the international child adoption program you saw on TV?
Where to start
Regardless of the amount you give, it can be handy to think like a wealthy dowager. Advisers to the rich help them plan charitable giving just as precisely as their investments.
"Strategic philanthropy," as it's called, is the opposite of waiting until you look at your tax return to see your ad hoc charity giving.
"It's good to take a step back and think, even if for only 10 minutes, is that the online charity you want to give to or the cheque you want to write?" says Terry Smith, who steers wealthy clients, families and foundations through their charitable giving at Philanthropic.ca.
"You ask yourself, 'What do I want to accomplish? What do I believe in? What's important to me?' " says Tom McCullough, who advises families as the president and chief executive officer of Toronto's Northwood Family Office.
Values, interests and need
Before advisers start to match their clients to specific charities, they play the role of psychologist.
Ms. Smith will walk her clients – who donate from $200,000 to millions a year – through various checklists, asking them to weigh the importance of, say, innovation compared with tradition, or community compared with personal growth. How important is democracy? Justice? Family?
Then, she'll show them a list of about 50 generic fields of charitable work, including economic development, ethnic communities, poverty and health, to rank according to their interests.
Mr. McCullough says, ideally, once an adviser knows more about what a client is passionate about, he can then "twin it with the world, where there is need."
For some, it's more about making an impact than it is about the particular cause. Mr. McCullough says Bill Gates wannabes are drawn to groups such as the U.S.-based Arabella Philanthropic Investment Advisors, which publishes regular reports on "high-impact giving opportunities." Its recent picks: charities aimed at curbing childhood obesity in the home and in child-care settings.
Need more help?
Ms. Smith says many clients still need a nudge to focus on what they care about. She'll ask more direct questions: Has someone close to you been affected by an illness? Would you support a charity in memory of a loved one? Do you want to support local projects, or initiatives across the country or in other countries? What are your friends supporting? Do you share any of their interests?
Put it in writing
Write up a mission statement, just as any foundation might do. "It's a good idea to write it down – it's a good dinner table conversation: 'What do we believe in? What in our history is important?' " Mr. McCullough says.
He says the list of possible motivations is endless. Guilt. A family role model who has always given. "Or some event that forces you into those existential questions of what's enough and what's important."
How much to give?
This is where you have to go with your gut. In Canada, the median annual donation is $250. Can you do better?
Mr. McCullough says many people use the traditional church tithe figure of 10 per cent of income – either gross or net.
There's also the concept of "enough," he says. "People will say, 'X is enough money for me,' then put any money beyond that into a foundation for charity."
How many charities?
The experts offer mixed advice when it comes to deciding on whether to pool your donations or spread them around.
Bri Trypuc, head of donor services at the Toronto-based charity analysis organization Charity Intelligence Canada, says it's risky to give to only one charity, as that organization may capsize, make poor financial decisions or simply be ineffective.
Sandra Miniutti, vice-president of marketing and chief financial officer of the U.S. charity evaluator Charity Navigator, takes an opposing view. Making larger donations to a smaller number of charities allows them to be more effective, she says. Moreover, it takes time to research and vet charities to make sure your money is put to good use. "If you're giving to many different charities, you're probably not doing a whole lot of research," she says, "… so it's more likely you're going to wind up making a more risky philanthropic gift."
If you're donating $1,000 a year and giving to $50 to 20 groups, that's probably too many, Ms. Smith says. "Ask yourself what's the best use of my $1,000? Do I give $1,000 to one group or maybe two?"
She says some people think in pie charts. They may give 50 per cent of their charitable dollars to their favourite cause, then leave the other 50 per cent to distribute between a handful of others, including some funds that can be set aside for spontaneous giving. Others will find themselves equally passionate about protecting animals and discovering a cure for breast cancer, so they'll divide it 50-50.
Experts urge donors to then research the charities they're interested in – everything from their financial statements to the percentage of their revenues spent on fundraising.
What about spontaneous giving?
Consider setting aside money for spontaneous donations, such as charity events and disaster relief funds. Ms. Trypuc suggests in addition to your primary charities, you should assign a percentage of your giving to support family, children and friends in races, walkathons and other such activities, and another for "entertainment giving," such as for charity golf tournaments, balls and dinners.
Mr. McCullough says he likes to do this himself, not because he has a specific interest in friends' and family members' causes, but because "I believe generally in encouraging volunteerism."
If you'd rather trim that kind of spending, having a solid plan can help you let people, including random charity canvassers, down easily: "You can honestly say, 'Great cause, but I've given for the year. Look me up next year.' "
Giving to disaster relief efforts is, similarly, a personal choice. Mr. McCullough says some people stay away from giving after tsunamis and earthquakes, being more inclined to look for causes that aren't splashed across the news. But Ms. Smith points out that if you do choose to make these sorts of donations, look for ones that governments will match or double, so your donation goes further.
How to part with your cash?
For most of us, a cheque or online donation will be the way to go, either annually or monthly – and giving enough to get a tax receipt comes naturally.
For some, it may be the main motivation. "A lot of people give, in part, because it's a tax decision," Mr. McCullough says.
Most individuals donate out of their after-tax income, says William Petruck, president and CEO of Toronto-based fundraising consultancy Funding Matters Inc. But, he says, "the dollars that a donor's giving should come from the most highly taxable area in their portfolio."
This means giving from an appreciated asset, such as capital gains stock, mutual funds, land or a piece of art, which would reduce the taxable component of the asset, he says. Not only does this maximize your giving ability, it allows you to foster a long-term relationship with the charity. Financial advisers, lawyers and accountants can help with this.
With additional reporting by Wency Leung