Sad children, abused animals… you’ve seen the commercials.
They do a great job of guilting people into giving ongoing donations.
But how much of your money was actually spent on helping?
How much was spent on admin costs, their CEO’s salary… or that commercial?
If you’re like I am, you were thinking, why didn’t they spend this money on feeding those children instead of paying for this expensive commercial?
Let’s look at how this all works…
Where All Your Money Goes
If it doesn’t go to the primary cause of the charity, where does it go?
Well, it actually goes to a lot of stuff.
A charity is a business and they have to keep it running.
These are some of the expenses charities can have:
- Administration costs (employee salaries)
- Advertising/marketing costs (those pamphlets you get in the mail)
- Rent/lease payments (they have to run the charity from somewhere)
- Utilities (they have to keep the lights on)
- Maintenance costs (as every business pays)
- Additional fees and costs (really specific, I know)
It’s not common, but there are some charities that have all of their administrative costs covered by donators. They do this so the money you donate can go entirely to the cause.
I love the idea of that, but again, it takes a lot of money to run a large organization so this isn’t super common.
There are still charities who don’t have their admin costs donated and who are still being good stewards of the money you donate.
We’ll start by looking at one of the most popular charities…
The American Red Cross
What are the typical admin costs? What do some of the top charities pay their employees?
The American Red Cross allocates 91% of every dollar to direct aid.
Here’s how the American Red Cross allocates their funds:
This is how much goes to direct aid for some other popular charities :
- Feeding America (98%, 100% during disasters)
- Feed the Children (92%)
- World Vision (85%)
- The Salvation Army (82%, 100% during disasters)
As you can see from the list, some charities maintain the same amount at all times and others allocate 100% to direct aid during disasters.
It looks pretty good. A high percentage of these donations go directly to aid — lower as you go down the list, but still fairly high.
How to Analyze Your Charity
When I wrote about the top 20 charities I found, based on fund allocation, I mentioned some sources you can use to see how your charity spends their money.
Here are five good ones:
- Charity Navigator – A source to evaluate charities through browsing or searching for specific charities. They give an overall star rating, as well as a financial score, and a score for accountability and transparency.
- Charity Watch – Another source to evaluate charities. They don’t simply give automated charity reports, they dive deep into the ins and outs of charities to help you make an informed decision. They use a letter rating system.
- BBB Wise Giving Alliance – The BBB (Better Business Bureau) isn’t just for businesses anymore. This alliances puts together thorough reports of a charity’s spending and activity.
- Charity Truth – This website is ran more like a blog. They post articles about specific charities and go into detail about their activities. They also have some great lists of charities, broken down by category.
- GiveWell – They provide summaries and reports on charities from all categories. I always learn something new about a charity I’m researching when I visit GiveWell.
There are other sites that do this, but these are by far the best ones I’ve found.
Maybe you’ve heard about the “outrageous” salaries some charity executives earn.
Again, we’ll talk about the Red Cross, since their CEO earns over half a million dollars per year.
I’m not here to argue about how much is too much, I am here to suggest you do your research. If you have a specific charity in mind and you’re concerned with how much their top employees earn, you can Google it. You can even specifically type in: “[charity name] CEO salary” and most of the popular charities will pop up the info without having to click a link.
If you think the employees deserve to earn high salaries, by all means, donate away. If you think they’re overpaid, you should probably find another charity.
The point is, you may have some research to do.
I don’t believe there’s a magic number or a cut-off as far as what is “too much.” Remember, they do have a lot of responsibility. It’s really up to you.
The CEO of the Salvation Army earns around $130,000 a year. Initially that sounds fair for the billions of dollars he manages. But then again, they also used to claim their leader earned $13,000/year and that turned out to be misleading. This is all why you need to dig deep and do some research before you donate.
Dig Deep and Donate
It’s up to you to determine what’s a fair amount of money to spend on all of the extra costs associated with running a charity and there are many.
I know you want to make the most responsible donation possible, so you simply need to do some research on the charities you plan to work with.
Use the resources above to dig deep and then donate.
I actually made it easy for you. I ranked the top 20 charities I’ve found by doing my own research.
Final Note: This is the best series I have ever heard in my entire life on giving: Compassion by Command by Greg Boyd (Woodland Hills Church). You can listen to the entire thing for free if you follow that link. It’s heavy directed towards Christians, but everyone would benefit from hearing it.
Further Book Reading
- The Complete Guide to Saving for and Sending Your Kids to College
- 47 Things You Weren’t Taught in School (That Our Kids Need to Know)
- Don’t Just Teach Your Kids to Set Goals, Teach Them to Do This
- 10 Practical Steps to Start Practical Minimalism
- Your Kids’s First Car: Everything You Need to Know
- Large-Family Minimalism: How We Declutter 5,000 Things a Year