4 Tips to Find the Right Charity

What's Hot

2 Types of Black Marks Might Vanish From Your Credit File SoonBorrow

6 Ways the Obamacare Overhaul Might Impact Your WalletInsurance

7 Dumb and Costly Moves Homebuyers MakeBorrow

This Free Software Brings Old Laptops Back to LifeMore

Obamacare Replacement Plan Gets ‘F’ Rating from Consumer ReportsFamily

Beware These 12 Common Money MistakesCredit & Debt

21 Restaurants Offering Free Food Right NowSaving Money

17 Ways to Have More Fun for Less MoneySave

House Hunters: Beware of These 6 Mortgage MistakesBorrow

30 Household Uses for Baby OilSave

25 Ways to Spend Less on FoodMore

Nearly Half of Heart-Related Deaths Linked to These 10 Foods and IngredientsFamily

5 Surprising Benefits of Exercising Outdoors in WinterFamily

10 Ways to Save When You’re Making Minimum WageSave

Boost Your Credit Score Fast With These 7 MovesCredit & Debt

7 Painless Ways to Pay Off Your Mortgage Years EarlierBorrow

The Most Sinful City in the U.S. Is … (Hint: It’s Not Vegas)Family

The True Cost of Bad CreditCredit & Debt

10 Companies With the Best 401(k) PlansGrow

This Scam Now Tops ID Theft as the No. 2 Consumer ComplaintFamily

6 Stores With Awesome Reward ProgramsFamily

6 Ways to Save More at Lowe’s and The Home DepotSave

6 Healthful Treats for Your DogFamily

New Study Ranks the Best States in the U.S.Family

Thousands of Millionaires Moving to 1 Country — and Leaving AnotherGrow

Strapped for College Costs? How to Get the Most From FAFSABorrow

6 Overlooked Ways to Save at Chick-fil-AFamily

Ask Stacy: What’s the Fastest Way to Pay Off My Mortgage?Borrow

Where to Sell Your Stuff for Top DollarAround The House

8 Ways to Get a Good Price on a Shiny New AutoCars

Ask Stacy: How Do I Start Over?Credit & Debt

Secret Cell Plans: Savings Verizon, AT&T, T-Mobile and Sprint Don’t Want You to Know AboutFamily

30 Awesome Things to Do in RetirementCollege

14 Super Smart Ways to Save on TravelSave

The Rich Prefer Modest Cars — Should You Join Them?Cars

You’ll Soon Pay More to Shop at CostcoSave

10 Ways to Save When Your Teen Starts DrivingFamily

Americans donate billions of dollars to more than a million charities each year. But they're not all created equal. Learn how to tell a fake charity from a real one, and a good charity from one that's great.

The number of charitable organizations in the U.S. has steadily grown over the past decade to more than 1.2 million, according to a Giving USA Foundation [PDF] report.

But not every charity deserves that name – the IRS regularly revokes the 501(c)(3) tax-exempt status of organizations that fail to disclose their finances, or that it believes aren’t acting in the public interest. According to the same report, the government dropped 275,000 nonprofits from the list in June.

Individual Americans donated more than $211 billion to charities last year, and are expected to give a similar amount by the end of 2011. But how do potential donors make sure the money goes to a charity that will make good use of it? In the video below, Money Talks News founder Stacy Johnson takes a look at tips for smart donating. Check it out, and then read on for more details.

The charity in the video above, a homeless shelter, spends about 80 cents per dollar on services. That’s actually pretty good – CharityWatch’s list of top-rated charities only includes those that “spend 75% or more of their budgets on programs, spend $25 or less to raise $100 in public support, [and] do not hold excessive assets in reserve.”

Administrative overhead, including advertising and executive pay, often eat up much larger percentages of a charity’s budget. Last year, Charity Navigator looked at charity CEO pay and found the CEO of the Scripps Research Institute makes more than a million per year. Others appoint family to high-paying board positions, and some spend your money on raising more with telemarketing campaigns.

Many legitimate do-gooders may not make the most effective use of your donation, and there are plenty of scams out there too. When it comes to charity, here’s how to run a check before you sign one…

  1. Read the mission statement. Charities sum up their cause and goals with a mission statement that should explain the reasons behind their activities. The statement should be on the organization’s website or promotional materials, and if you don’t feel it matches your own causes or what the organization actually does, move on. Be skeptical of any group without a mission statement – that doesn’t speak highly of their organization skills, or how they make spending decisions.
  2. Look at money spent on the cause. It’s one thing to say you want to help people, and another to do it. You can request an organization’s financial report (called Form 990) and dig through it yourself to see if the walk backs the talk. Many are online and searchable in the Foundation Center’s 990 Finder. There are also sites that have already done the work for you, like Charity Navigator, CharityWatch, GuideStar, and the Better Business Bureau. These kinds of sites also feature donor reviews to give you more perspective.
  3. Review charity status. Sometimes charities get dropped off the IRS’ list. Aside from the tax deduction implications, and as Stacy said in Is Your Charity Still Charitable? How to Find Out, “losing tax-exempt status is a definite red flag and something you’d want explained.” You can find the IRS list of organizations that lost 501(c)(3) charity status online.
  4. Give them a call. Sometimes scammers use the good name of legitimate charities to swindle money, by either copying it or taking a similar name. Never feel rushed or pressured into donating at the door, the red light, the checkout counter, or even over the phone. You can always donate later, after you’ve found official contact information from another source and checked the group out. That’s how Stacy once found a scammer using collection boxes in local stores – they not only copied a real charity’s name, but also its phone number. When he called, Stacy found out they didn’t use boxes – and weren’t even fundraising in his state.

Who to trust

If you’re not sure about a particular charity, chances are there’s another one doing similar work. For instance, if you want to support veterans, here are five highly rated military/veteran charities from Charity Navigator…

And here are five cancer-fighting charities with an A rating on CharityWatch

Both sites have lists of many other categories, from children to animals. Picking from top-rated charities is the quickest way to make sure your money goes to a good cause. You also might want to check out 7 Gift Ideas That Help Charities, and make sure you get credit on your taxes for your good deeds with 5 Tips to Deducting Holiday Giving.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!


Read Next: Considering a Fixer-Upper? 15 Ways to Avoid a Money Pit

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,985 more deals!