Many young people find donating to causes close to their heart difficult to fit into their budget. Embarking on a first career and faced with growing expenses, donating is often pushed to the backburner out of necessity. At this early stage in life, extra money is typically put towards saving for the future. However, as people become more established, many choose financial donations as a way to support important causes.
According to Statistics Canada, the average donor is between 50 and 55 years old. Furthermore, the average donation amount vastly increases as people become more financially stable and able to give to charity (as seen in Figure 1).
A donation can change someone’s life for the better. In North America, individual donors give nearly 60 times as much as the Gates Foundation and nearly 5 times as much as all other foundations combined. No matter the amount you give, every little bit adds up to a significant impact.
Find an issue important to you
Is there an issue or cause already at the top of your mind? Perhaps there is an organization that has helped you or your loved ones in the past. Or possibly an illness has hit close to home, and you would like to help fund research for a cure. The key here is to simply find an issue that is important to you and decide what you can do to support it.
Do your research
Do your research and think about how your money can have the greatest positive impact. MoneySense compiles a yearly ranking of Canada’s top charities, including a ranking system that breaks down each charity by factors like charity efficiency and governance. It is also important to consider fundraising costs and transparency in your decision making. Research is not a witch hunt but rather a way to ensure maximum bang for your donated buck.
How to donate
The most popular donation method for both annual and one-time donations is gifting through cash, cheque or credit card. You can donate through the charity of your choice or online to any registered Canadian charity at Canada Helps. However, there are many donation options to suit your needs.
The CRA allows people or estates to donate publicly listed shares, bonds and mutual funds directly to a registered charity. Donating shares is perhaps the most efficient way to give to charity as the CRA does not apply capital gains tax to your donation. Capital gains represent the increase in value of your shares over time. When you sell your shares, you are responsible for the tax due even if you plan to donate the proceeds from the sale. If you pay tax out of the proceeds, there is less available to your charity of choice. However, when you donate your shares directly, those capital gains are not subject to tax meaning your charity receives a larger gift.
Alternatively, you could leave money in an estate. In Canada this can be done as either a lump sum or a percentage of the total value of an estate left to an organization. It is also possible to make a charity a full or partial beneficiary of your RRSP or RRIF. You can also leave money through an insurance policy; however, this is not as common as the previous methods.
It is also possible to donate land, art and other valuables. Land is typically donated when that property hosts sensitive species or ecosystems. In this case the land can be donated to the Canadian government or a charity approved by the Department of Environment and Climate Change in order to have the land certified under the Federal Ecological Gifts Program. Land can of course be donated to other charities as well, but certified ecologically sensitive land allows for a tax credit worth 100% of the fair market value. Art and other valuables can also be donated but they must be appraised. Typically the charity is responsible for the appraisal but often gifters donate cash as well in order to cover appraisal costs.
Money isn’t the only gift you can give as your time is also incredibly valuable. Think about the skills and passions you have developed throughout your life and how they could be used to help your favourite organizations. If you have more free time available to you in retirement, think about spending that time volunteering for a cause that holds meaning to you.
It is important to remember that there is no right or wrong way to give to a charitable organization. It is beneficial to help out in whatever way you can, no matter the amount you are able to gift.
As always, Rae Lipskie’s experienced wealth managers are available to offer their expert advice on how to make your wealth work harder — both for your future and your community’s.
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