The average American gives 2.6% of their income to charity every year. How much do you give?

It’s that time of year again, when everyone is asking you for money. I wanted to refresh my post from last year with some new data and reflections on giving. My hope is that this will help you be more deliberate about how you give, so that when someone asks if you would like to donate to their cause, you already know your personal giving philosophy and budget.

I have been doing this exercise, of evaluating my donations based on my personal priorities, since 2012. That year I did a project consulting for a non-profit, and it prompted me for the first time to reflect on how I had donated, vs. reactively giving to whatever cause gave me a compelling pitch. I was a sucker for NPR donation drives at the time…

Over the intervening five years, I’ve tracked every dollar I donate so that, when the real giving season begins in December (30% of all donations are given in this one month),¹ I can be deliberate about how I give.


Building your charitable portfolio

If you think you would also like to approach giving in a more structured way, here’s my advice. You can make a copy or download this worksheet if you’d like to “follow along”.

Step 1 — What was your gross income in 2017? Be honest with yourself on this; it should include base, bonus and equity compensation.

Step 2 — How much do you want to give in 2017? A good place to start is your gross income x 2.6%, the average across all Americans in 2015.²

Step 3 — How do you want to allocate your donations by “sector”? Philanthropy is a very personal decision, so this should be tailored to your interests, and potentially also the world we live in. For example, I donated more to disaster relief efforts this year because of the hurricanes in Houston, Florida and Puerto Rico.

Step 4 — How much have you given so far this year? It can be a bit difficult at the end of the year to remember which causes you gave to, but you can estimate this step if you aren’t sure. I use a spreadsheet to track donations throughout the year, so that this step is easier at the end of the year.

Step 5 — Go shopping for charities! This is the best part of the process — now that you know how much you have left in your “charitable investment portfolio” for the year, identify charities that should get the remainder of your dollars. This could mean doubling down on organizations that you already give to, or finding a new organization that does work in a charity “sector” that you care about. If you are looking for worthy causes, let me suggest a few sources of inspiration:

  1. One For The World uses GiveWell (a charity evaluator, more info below) plus a couple other sources to create a portfolio of “Top Picks” that is updated on an annual basis; allowing you to “set it and forget it”. Full disclosure — I am on the board of this organization.
  2. The Tipping Point Community does something similar to One for the World, but focused on the San Francisco Bay Area. If you live in the area and are concerned about income inequality, general poverty or homelessness, they are a great organization to support.
  3. Natural Resources Defense Council does great environmental work, and is more highly rated by Charity Navigator (with 4 stars) vs. other organizations like World Wildlife Fund.
  4. International Rescue Committee and Doctors Without Borders both do great work focused on refugees and disaster relief.
  5. In general, consider giving to organizations that work outside of the US; only 6% of donations in the US go to charities that do work internationally,³ but your dollar can benefit more people in developing countries.

If you want to look for other charities that appeal to you, consider using the below resources to inform your pick:

  1. GiveWell does rigorous analysis (e.g. randomized controlled trials) to understand the return on investment for every dollar you give to a charity. Their Top Picks (e.g. Against Malaria Foundation, GiveDirectly) and Standout Charities (e.g. Development Media International, Living Goods, Project Healthy Children) are all excellent organizations, where you can be assured that your dollars are having a massive impact.
  2. If you want to support another cause, but you’re not sure who to give to, Charity Navigator has good insight into ~9,000 of the largest charities. Their start rating system can help you make sure your dollars are being spent responsibly.

My giving in 2017

2017 is the second year that I’ve achieved my donation goal, of 2.9% of my gross income.⁴ As you can see in the chart below, the main change in my giving was an increase in donations to disaster relief / refugee organizations, due to the significant natural disasters in the US. But I made sure to stay away from the Red Cross, which has a terrible track record of actually helping afflicted areas, and instead donated to effective local organizations (Tipping Point, in the case of the Napa fires).

I found it very easy to determine how to give this year because I had the baselines from last year to understand how my giving was changing, and I was comfortable with those changes. I continue to strive to make my giving more thoughtful (which may mean more tax efficient for 2018), but one year at a time!


Footnotes

1 Network for Good, 2015, link

2 Based on latest IRS and Giving USA data, 2015

3 Charity Navigator, 2017, link

4 I thought 2.9% was the average based on 2011 NCCS data; I think the decline to 2.6% is due to a different estimation methodology, so I feel good about about erring on the side of caution and giving a little more than average.