Author: Joyce Huang, Graphics: Nina Tagliabue
The BRB Bottomline
With the holiday season coming up, you may want to donate to a charity but feel overwhelmed by all the options. We’ve all heard of the lack of transparency with the largest charities, but why do these charities consistently remain popular? With some research, you can overcome this issue and find the most meaningful ways to donate.
Old v.s. New Charities
The best charities are estimated to be 100 times more effective than the average charity. This difference may be surprising, because we subconsciously compare charities to for-profit firms. When you think about the market for similar products, we know that a product can’t survive when priced 100 times more than the others. In contrast, market forces don’t act on charities the same way. Because people usually don’t pick charities based on their cost-effectiveness, we don’t push charities to get the most bang for their buck, and we don’t see how they truly perform. Thus, we often don’t realize how different charities can be—and how researching the best ones truly makes a difference.
Because of this lack of market forces, new charities rarely replace old charities that have become outdated or ineffective. Even the most creative and effective charity startups struggle with attracting investment. This is worsened when charity startups can’t spend too much on advertising, because evaluators would lower their effectiveness score for expenses not directly spent towards the cause. Furthermore, charities often lack transparency, which prevents people from making the comparisons needed to choose a less popular brand.
Where to Donate
Many charity effectiveness evaluators have found that large charity organizations are often less cost-effective and less transparent about where your money goes. Furthermore, these organizations tend to focus on disaster relief rather than public health. While disaster relief is extremely important, if we want to focus on the most cost-effective ways of getting the most bang for our buck, we should donate to public health programs. Similarly, you can get the most bang for your buck when donating to third-world countries rather than U.S. communities. Although many U.S. communities are impoverished, experts have found that the amount of impact each dollar can bring is much more in third-world countries. There is nothing wrong with donating to nearby communities or communities that hold personal significance to you—it should be encouraged. But if you don’t have any personal ties and just want to produce the most good out of each dollar, you should donate to third-world public health programs.
One popular and reliable charity evaluator is GiveWell, which provides in-depth analysis and a ranking of the best charities. If you can’t decide, you can also donate to the GiveWell Maximum Impact Fund which picks the top charities where the money is most beneficial given current funding needs. Furthermore, GiveWell supports new charities and suggests charities where each additional donation can provide the most good. Rather than assessing which organizations are the best, this suggests charities that need and can use new funding immediately rather than sitting on it. Lastly, you can donate through direct cash transfers, which guarantees that your money will be received.
- We often underestimate the differences between charities, as the best charities are 100 times better than the average charity.
- New charity startups struggle with attracting investment, but many are more effective than the brand-name charities.
- By researching, we can find the most cost-effective ways that stretch each dollar of our donations.
- Experts have found that the most cost-effective charities are usually third-world public health programs.