Budgeting

Giving to Charity When You're on a Budget

Don’t forget that your time has value, too. Volunteering is the best way to see if you like how the charity is run.

A few issues ago, I interviewed Doug Lynam, a former monk who now works as a money manager in Santa Fe, N.M. (see Building Wealth With a Higher Purpose). One of the topics we discussed was the importance of charitable giving, and it got me thinking: How can I make a difference on a limited budget?

One strategy is to combine philanthropy and saving by investing in companies that seek to make the world a better place. There are apps that will help you do that. The Stash app, for example, identifies exchange-traded funds and individual stocks that allow you to invest in companies that align with your convictions, from clean energy to workplace equality. (You can also invest in specific sectors or pick ETFs that match your risk tolerance.) You need only $5 to open a Stash account, and you’ll pay just $1 per month for a beginner’s account. Another option: Find out if your 401(k) plan offers a socially responsible fund, such as Vanguard Global ESG Select Stock (symbol VEIGX) or Parnassus Mid Cap (PARMX), a member of the Kiplinger 25 list of our favorite actively managed no-load mutual funds.

Apps and socially responsible funds may sound like an easy way to hop into the charity lane, but they may not be a smart investment strategy—particularly if you’re new to investing, says Pamela Capalad, a certified financial planner and founder of Brunch and Budget. You could end up with a portfolio that’s not sufficiently diversified, she says. Capalad believes there are ways to give money that are more effective.

Giving directly. Like most millennials, I’ve been bombarded with charitable solicitations on social media. Facebook added a feature in 2017 that allows users to request donations to their favorite charity in lieu of birthday gifts. Depending on how many Facebook friends you have, the posts can be overwhelming, and unless you vet the charities, you have no idea how the money will be used. Donating small amounts to multiple causes may seem like the most generous thing to do, but experts say you can make a much greater impact by limiting your donations to one or two charities.

GoFundMe pitches tend to populate my Facebook news feed as well, and some of these are even more troubling. You’re usually prompted to help people or organizations that one of your friends has heard about, but you have no way of knowing if help is actually needed or if the fund-raiser is a scam. In 2017, a couple collected close to $400,000 from donors purportedly to help a homeless man who lent the couple his last $20. All three have been charged with fraud.

If something on your social media feed does catch your attention, do your homework. You can look up charities on Charity Navigator and the Better Business Bureau’s Wise Giving Alliance site (www.give.org). Charity Navigator rates charities on financial health and accountability; the Wise Giving Alliance checks out governance, fund-raising, effectiveness and donor privacy. You’ll also want to search the internet for complaints and reviews about the charity. If the charity is mostly local, try searching for it on your region’s Better Business Bureau website.

To be able to give more generously, Capalad suggests creating a line item in your budget for charity and shifting money from things you don’t use often, such as subscriptions to streaming services. For example, if I canceled my streaming subscriptions, which cost me about $21 a month, I could give $252 a year to charity. And don’t forget that your time has value, too. Lynam says volunteering is the best way to see if you like how the charity is run.

I’m still on the fence about where I would like my charitable dollars to go, and I’m reluctant to give up my HBO account. So in the meantime, I’m looking into volunteering at local cat shelters.

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