Charitable giving: 7 things you need to know

Donating your family's time or money to charities will teach your children the importance of helping others in need. But where to start? There are so many important causes asking for support, and so many variables to consider (like how much to give?).

Follow these straightforward pointers to create a family donation plan, and get giving!

A version of this article appeared in our December 2012 issue with the headline "Give Smart!" pp.58-60.

Planning your charitable donations — as you do your other investments — ensures that you are supporting the causes your family really cares about.

Involving your kids in giving “exposes them to the world outside their own and [teaches] value the concept of giving,” says Bri Trypuc, head of donor advisory with Charity Intelligence, an organization that analyses charities to help donors make informed choices.

Remember when your dad told you it didn’t matter how much you put in your RRSP, just that you got into the habit of investing? The same goes with charitable donations.

“Even $10 can have a big impact if you give in a smart way,” says Trypuc. Charters says that one to three percent of net income is a general guideline for total charitable donations. But he does suggest giving “until you feel it. A bit of sacrifice reminds you that you are giving and gives you that warm feeling.” That hit will hurt less if you contribute through the year instead of in one lump sum. Collacutt suggests setting up monthly pre-authorized payments to a bank account dedicated to donations. You can also authorize a charity to charge your credit card or deduct cash from your bank account on a monthly basis.

Charities appreciate the green stuff, but they can also use some elbow grease and supplies. Consider adding volunteering to your plan.

The fun part is figuring out what you’re going to do with your contributions. Start by thinking about what’s meaningful to your family: Maybe you’re big theatregoers and would like to support the arts. Or maybe you’d like to contribute to an organization that is helping Uncle Tim in his battle against cancer.

Another consideration is whether the donations should be directed locally, nationally or internationally. CanadaHelps allows you to do an advanced search defined by location and cause. Once you have some candidates, you’ll want to make sure they’ll use your money wisely.

This is where it gets complicated. There are more than 85,000 registered charities in Canada. The Canadian Revenue Agency lists all registered Canadian charities, along with their registered charity information returns, on their site, cra-arc.gc.ca/charitylists. This information is also listed in a more readable fashion on the new website, charityfocus.ca.

Understanding how much cash reserves a charity has — relative to its annual program spending — may determine whether they have an immediate need for your money.

Charity Intelligence uses a number of criteria to rate many of the top charities in Canada. Check out our sister publication, MoneySense magazine’s annual Charity 100 at moneysense.ca. You might also want to contact board members and volunteers to get a clearer picture.

It’s important to review your charitable plan annually to make sure your choices still reflect your family’s interests.

You might also consult with your financial planner or banker: They can advise you with more complicated giving options, such as the donation of stocks and bonds, which are exempt from capital gains.

But no matter the details of your plan, says Trypuc, you can feel good about it. “It’s the act of giving that’s significant.

Tempted to throw the change from your latte into that fundraising box at the cash? You’ll miss out on the benefit of a tax receipt.

The misconception is that you have to donate a certain amount in order to get a receipt, but by law, your donor rights are that you can request one at any amount.

Get pangs of guilt when you turn down a telemarketer or clipboard-wielding fundraiser?

When you plan your charitable giving, says financial planner Karen Collacutt, you have a built-in response: “We’ve already chosen our charities for this year but we’d be happy to consider you next year if you would like to send us some information.”