Mellody is president of Ariel investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts. Additionally, she is a regular financial contributor and analyst for CBS News.
SKIP: Good morning Mellody!
MELLODY: Good morning!
SKIP: We’re talking about charity this morning?
MELLODY: We are talking about charity, but we are also talking about how charitable giving is changing as new technologies and new generational trends emerge. As we have discussed on Money Monday’s before, giving is ingrained in many Americans. Last week, Gallup released a survey of giving habits by country, and the U.S. tied for first place as the world’s most generous country, according to the 2014 world giving index. And we are especially generous during the holiday season. But we are living in a tech-driven world, and changes are afoot. So this season, you will see some new ways to give out there that will be a lot more convenient than rummaging for change for the fundraiser on the street.
SKIP: OK, before we jump into the changes, how important is charitable giving this season?
MELLODY: In a word, critical! A full 40% of all individual charitable donations are made in December. For many charities, the holiday season is as important as it is for retailers, determining whether they had a good year or a bad one. Teach for America receives nearly 80% of all individual donations in December. Save The Children gets nearly 70% of its donations during the final month of the year. This season is a really big deal when it comes to supporting the great work the charitable sector performs!
SKIP: So how is technology changing the charitable sector?
MELLODY: there are many, many ways that technology has impacted fundraising, with most of them being positive. Where traditional fundraising required months of planning, outreach, paperwork and preparations for a big event, new strategies simply require a mouse click or a text message! Take the 2010 earthquake in Haiti. Over $40 million was raised via text in the aftermath of this tragedy. More recently, we have seen the power of Facebook and Twitter awareness campaigns! The ice bucket challenge phenomenon raised over $100 million for the ALS association this summer. These examples really demonstrate how the ability of charities to reach out and make it easier to give is transforming charitable giving at a breakneck pace. Giving is becoming more diversified, more democratic, more interactive, and it is heavily tapping into our own personal networks. But perhaps most importantly, it is simply becoming more convenient and tailored to our everyday routines. Recently, there has been a movement to digital tithing in churches, simply because people are moving away from cash. The Salvation Army bellringers even have mobile credit card readers from Square!
SKIP: How do generational changes factor in?
MELLODY: The generational change is going to be very important for charities to navigate if they want to continue to raise money. Currently, a keystone of american charity is that Americans simply give out of habit. One recent research paper found that nearly 4 out of every 5 gifts was out of loyalty, meaning most people give to the same familiar brands year after year. That’s one reason why the list of America’s largest charities has remained nearly unchanged for 40 years. But things could start to move in another direction due to the millenials. Why? Research has found that millenials do not like to give out of obligation. This generation desires to feel invested, and connected, with the causes they support. All of this means that charities are having to adapt away from legacy donor model, to new strategies that allow them to share compelling stories and generate continued interest, in preparation for the coming generational shift. And what a shift it will be. The millenial generation is 80 million strong, and they are now reaching ‘giving’ age and they are approaching charitable engagement in new ways.
SKIP: What do we need to know for this giving season?
MELLODY: Well, you have to do your homework. Some of the considerations are traditional. Take the time to consider how you can have a high impact with your hard-earned dollars. Think about who you really want to help and who needs your help. After that, hop on the internet to investigate the organizations or charities out there that are working to address this cause. In the past 5 years, a number of new resources, such as charity navigator or just give have emerged, and they allow you to search by category or by location. Also, if you want to search locally, simply type in ‘find local charities’ in your favorite search engine.
The less traditional piece of this emerges in the security space. We talk a lot about protecting your personal and financial information on money mondays, and charitable giving is no exception to the rule. Due to the technologies and platforms involved, it is very important to ensure that the cause is real, and that your information is secure. For example, if you are thinking about donating to a Kickstarter campaign, or another charitable cause supported by crowdfunding, know the risks. There is no guarantee that it will be completed. The same goes for appeals that you may come across that ask you to text $10 to a cause.
Be cautious about who you give to and how you give. Make sure to do some digging. Try to contact the organizations you are considering to make sure your donation is tax deductible. If they are not, then you should consider other organizations. The Internal Revenue Service also lists all organizations registered as charities, so you can always fall back to that list. Finally, never give out credit card or personal information via phone or email, do not click on any links in emails asking for money, and do not give cash, as you can never be sure that that is not going in someone’s pocket.
SKIP: Thanks for your help, Mellody and Happy Thanksgiving to you and your family!
MELLODY: Happy Thanksgiving, everyone!