My friends and I have agreed to give charitable donations for the holidays instead of physical presents. What’s the best way to do this?
What a great way to put the true spirit of the holidays back in focus. Gift giving has become so stressful—and expensive—that the whole reason for giving a gift often gets lost in the rush and worry of the season. So I applaud you and your friends for wanting to share your good fortune with others while at the same time acknowledging each other in a special way. But just because you won't be hitting the malls and combing the stores for just the right scarf or sweater doesn't mean that you don't need to give a lot of thought to your gifts; in fact, it's the thought you put into choosing a charity that's meaningful to the recipient that will make this type of gift truly memorable.
Set some gift-giving guidelines
With this in mind, I suggest that you and your friends get together ahead of time to set some parameters. For instance, are you all going to give gifts to each other or will you draw names? Will you set a financial limit on your gifts, say $50 or $100? Since it's likely that you have different levels of discretionary income, this might make everyone feel more comfortable.
You could also consider buying a small physical gift, as well as make a charitable donation. There's no right or wrong way to go about this, but you should all agree upfront so that everyone feels equally included.
Make it personal
It's one thing to write a check to a charity in someone's name and another to choose just the right charity that represents an individual's interests. You won't have to be thinking about what color a friend looks good in, but you can give equally careful thought to their beliefs and personal causes. Is it saving wildlife? Feeding the hungry? A special program for kids or teens? Do they volunteer for a specific organization?
There's so much to choose from and every community has a myriad of worthy local programs on top of the well-known national charities. Take the time to research creditable organizations using your unique insight into what's most meaningful to your friend. You might also write a short note describing why you chose a particular charity for a certain person. It then becomes a very personal gift.
Explore different ways to give
Once you have the type of charity in mind, there are a variety of ways to make the donation. A quick search on the Internet shows a number of online charitable giving sites that make it easy to choose from literally thousands of individual charities. Some even offer charitable gift cards that you can personalize and give to a friend who can then choose to "spend" it on a specific charity they want to support.
If you want to make charitable giving a more constant part of your life—and you have the money—you might want to look into a Charitable Gift Account (also known as a donor-advised fund account) offered by many major financial institutions. It takes an initial contribution of around $5,000 to open the account, but you get an immediate tax deduction. You can then make grants over time to any public charity—including grants made on behalf of someone else. This could be particularly helpful if you plan to make this type of gift-giving a yearly event.
Of course you can always write a personal check to the charity of your choice in the name of your friend. Organizations are usually more than willing to provide some sort of acknowledgement that you could then include in a personal card.And just for the record, if you make a donation to a qualified charity, it may be tax deductible but only if you itemize your deductions. For any cash donation, you need a receipt or bank record that includes the date, amount and name of the charity. There are a few other IRS rules, so it's best to check with your accountant for specifics on tax deductibility.
Keep it a surprise
To me the element of surprise is half the fun of giving a gift and you don't have to lose that because you're doing things differently this year. Whether you get together as a group to exchange gifts or do it individually, if you keep your charity choices a secret until you present the gifts, I think you'll have just as much fun surprising each other with your thoughtfulness as you would with a traditional gift. And if you take the time to think it through and do your research, you can feel confident that your gifts will be just the right fit. Happy Holidays!