Giving with purpose: Tips for effective philanthropy

Reuben Rashty

Historically, charitable giving rises about one-third as fast as the stock market.1 In 2017, Americans gave more than $410 billion to charity, with the majority of charitable dollars going to religion, education and human services.2 Among high net worth households, approximately 90% give to charity.3

Engaging in philanthropy—as an individual or as a family—can be one of the most meaningful and transformational aspects of your life. The benefits of charitable giving extend far beyond the dollars you donate or the financial benefits you may receive, such as tax savings or cash flow from charitable gift vehicles that provide distributions. When charitable giving is tied to issues — values and causes that are collectively important to you and your loved ones — it becomes more than a gesture or a transaction. It enables children, parents and grandparents to join together and work toward addressing or alleviating real problems in your local community or in the world at large. In this way giving becomes a family affair, or even a family tradition, that is passed from one generation to the next.

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Getting started with effective philanthropy

Every dollar you put into the world has an impact, but how do you ensure that your charitable giving aligns with both your values and the change you hope to see in the world? Here is a quick roadmap for practicing strategic giving and maximizing your impact.

Step 1. Find your philanthropic passion. The first step in your giving journey involves finding your philanthropic passion. Start the process of purposeful philanthropy by considering what matters to you and what you hope to accomplish. Ask yourself the following questions:

• What fields of interest would we like our philanthropy to address?

• What criteria will we use to identify which organizations to support?

• How important is having control over how our gift(s) are used?

• How will we measure our impact?

Creating individual or family mission and vision statements around philanthropy helps ensure that your giving is guided by a consistent set of values and goals. Once you’ve established your guidelines for giving, you will want to identify causes, issues and organizations that you would like to support. Charity-ranking organizations such as Charity Navigator or BBB Wise Giving Alliance can be useful for assessing a nonprofit organization’s financial health, operational transparency and accountability in reporting on progress.

Step 2. Choose ways to give. There are many ways to give back, whether you choose to give money directly to a charity, create financial vehicles to facilitate giving or donate your time to volunteering for a nonprofit organization. Each of these ways has their advantages and disadvantages, and your Financial Advisor can help you determine which method(s) of charitable giving will allow you to practice purposeful philanthropy while still pursuing your other financial goals.

Step 3. Practice strategic giving. You want your giving to count, and you want to know that your charitable dollars are making a meaningful difference. To maximize your impact, you may want to consider pooling your giving with that of other like-minded individuals and families who support the same cause. Or, you can choose to tie your gifts to specific programs or initiatives so you can track the effectiveness of your philanthropic dollars. It is also a good idea to stay engaged with the nonprofit organizations you support by requesting impact reports or even communicating with their leadership to understand their progress.

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Taking the leap to investing with impact

Your philanthropic potential is not limited to the gifts you give to causes and organizations that are important to you. The way you choose to invest your wealth can also help you achieve meaningful philanthropic outcomes. Impact investing—also known as investing for the three P’s of people, planet and profit—involves seeking environmental, social and governance benefits alongside a financial return. If you are interested in learning more about how you can align your investment portfolio with your purpose, talk to a Financial Advisor with experience in impact investing.

Footnotes

1 The Foundation Center.

2 Giving USA  2018.

3  The 2018 U.S. Trust Study of High Net Worth Philanthropy conducted in partnership with the Indiana University Lilly School of Philanthropy.

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Want to talk to Reuben about this or other topics featured in The Economic Blueprint?  Please email him at reuben.rashty@morganstanley.com or call him at 248-723-1843.  You can also contact Reuben’s colleague Kyle Zwiren, J.D. at kyle.zwiren@morganstanley.com or 248-723-1870.

Reuben Rashty is a Managing Director / Financial Advisor with the Wealth Management Division of Morgan Stanley in Bloomfield Hills, Michigan.  The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives.  Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Smith Barney LLC, Member SIPC, or its affiliates.

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