Donating is something that everyone benefits from, including yourself: When you spend money on someone else, research shows you can boost your happiness.
A giving circle is a particularly effective way to donate, and by participating in one, you ensure your donation can make a big difference. With a giving circle, people pool together their money and time to collectively decide where to spend their resources. Though it’s a simple concept, if you start a giving circle (or are part of one) you can .
In 2016, 1,087 giving circles existed in the U.S., up from 400 in 2006, according to a 2016 report from Collective Giving Research Group (CGRG), which analyzes giving circles.
What’s more, people in giving circles donate more money and time to charities than individuals not in a circle, CGRG concluded in a 2018 study about the impact of collective giving on giving circle members.
“Members have told me that they didn’t see themselves as philanthropists before they joined. Now they see the word philanthropy differently,” Tracey Webb, the founder of the giving circle Black Benefactors, says.
But it’s not just about the money. Both Webb and Hali Lee, founder of the Asian Women Giving Circle (AWGC), say the social aspect of giving circles is the glue that keeps their groups going.
“We go out, we drink… I don’t think we would have lasted this long if it wasn’t fun,” Lee says.
Lee and members of her giving circle even joke that they’ll all live together when they get old.
Mashable talked with Webb and Lee to learn how to start a giving circle. Here are the steps they shared.
1. Choose members wisely
Don’t try to include every single person you know in your giving circle as too many people can make it unmanageable. Although you can expand once your circle is formalized, start with a small group. Lee thinks 10 is the ideal number of people, though it’s not an exact science. Feel out what number works for your group, and go from there.
Start by making a list of friends who share your values. This actually matters more than identity when building a powerful, strategic, and effective donor community, Lee says. Maybe you and three of your friends all think it’s important to empower immigrants of color. This could be a good focus for a giving circle.
That said, there’s not a specific personality type you should seek out when looking for members. “I think anyone can have fun in a giving circle and find it a productive, meaningful community,” Lee says.
Around 60 percent of giving circles are formed around a common “particular identity,”such as gender or sexual orientation, according to the 2016 CGRG report.
Webb, for her part, is black and her racial identity is the backbone of her circle. Although not all of Black Benefactors’ members are black, the majority are, says Webb. She learned through a job granting money to nonprofits that organizations led by communities of color are significantly underfunded. Black Benefactors is tackling this race disparity as it only funds black-led organizations in the D.C. area. (where Black Benefactors is headquartered)
2. Hold your first meeting
At some point, you’ll have to discuss the more business-y aspects of your giving circle, but first get to know each other, Lee says. Throw out a few ice breakers to get members talking about what’s important to them. Lee suggests asking questions like “What brings you to this room?” “If you could wave a magic wand and change something about our world, what would it be?” and “What brings you joy?” People should also bring food and drinks to meetings so the gatherings don’t feel too formal.
Then figure out who will lead, Lee says. It could be the person who started the circle. That’s often the natural choice, but this isn’t a hard-and-fast rule.
There’s also the option of sharing leadership or rotating it, Lee says. Clear communication helps avoid drama if you go this route, Lee says. Whether you stick with one consistent leader or switch it up from time to time, you’ll want your leader to be organized and empower other members of the group. Highlighting accomplishments of members during meetings can be a good way to keep everyone motivated.
During the first meeting, the leader can ask the group some important questions about topics like the group name, size, mission, donation amount per member, geographic restrictions to giving, and organizations to support.
To give you a sense of how often your circle might want to get together, AWGC meets about four times a year for business purposes and another four times for social outings.
3. Decide on a structure
Giving circles should decide where they will keep their money and how it will be distributed. You’ve got a few options. Members of the circle can simply write individual checks to the organizations the group decides to fund, says Webb. This doesn’t require any preparation, besides bringing checks to meetings or just mailing them to organizations.
You can also store your members’ money in a donor advised fund (DAF), which is like a charitable investment account where the circle can put its money. DAFs can be operated by a local community foundation (a public charity that pools donations and gives the funds to local nonprofits) or another fiscal sponsor. A fiscal sponsor is a nonprofit organization that has legal control of the money and sends the funds to organizations. But the giving circle advises where the money goes.
It’s common for a fiscal sponsor to charge a fee for its services, including administrative ones. You can use this fiscal sponsor directory to find a sponsor in 36 states, D.C., Puerto Rico, and Ontario, which the National Council of Nonprofits, a network of nonprofits in the U.S., points to on its website. The organizations listed in the directory have information on eligibility requirements, fee structure, and philosophy, designed to help anyone looking for a sponsor find a good fit. Any nonprofit doesn’t work, though: It must be tax-exempt to serve as a fiscal sponsor, according to the National Council of Nonprofits.
If your giving circle wants to go the community foundation route, you’ll have to research some in your area to get started. Check out the nonprofit leadership association Council on Foundations’ community foundation locator to find community foundations in all 50 states, D.C., and Puerto Rico. You’ll want to meet with a few foundations (though, in some states there is only one) to learn about any requirements, fees, and expectations, Webb suggests.
Black Benefactors has found both benefits and downsides to being a donor-advised fund. A fiscal sponsor can handle administrative tasks, which allows a giving circle time to focus on running itself, says Webb. For example, Black Benefactor’s fiscal sponsor disburses its money to organizations and sends thank-you letters to donors. Also, because a fiscal sponsor is a charitable organization, Black Benefactors (and generally, giving circles that utilize donor-advised funds) can accept tax-deductible donations.
But operating as a donor-advised fund can also have its downfalls because you can’t use the money members donate for administrative expenses such as hosting events and creating a website. That’s because these funds can only be used to send money to other public charities that are in good standing with the IRS, Webb explains. It can also be expensive to open a donor-advised fund, as most require a $2,500 to $5,000 initial contribution. Webb chose the online digital contribution platform Growfund for this reason, as there’s no minimum required contribution on the online platform.
You can also set up your giving circle as an IRS-approved charitable organization. Starting a charity involves many steps, such as applying for tax-exempt status with the IRS. Starting one can be a time-intensive process, so research the steps beforehand to see if you’re willing to put in the work. Like a donor-advised fund, a charity accepts tax-deductible donations. But operating as a charity can be laborious, even after you set it up. You have to maintain detailed records of your donations and send a yearly tax form to the IRS, so your giving circle can keep its tax-exempt status (though, some organizations aren’t required to file this form). For her part, Lee says there are many reasons why she decided not to make her giving circle a charity as they don’t have to file taxes and deal with the headache of a possible IRS audit.
4. Show off your grant recipients
Once you start giving money to organizations, you should highlight their work on your website, social media, and other platforms that make sense to your group. Doing so can increase organizations’ visibility, Webb says. Both Black Benefactors’ and AWGC’s websites describe the nonprofits they’ve granted money to and how much money they gave to each organization.
This is especially important for Black Benefactors. In Webb’s experience, nonprofits led exclusively by black people have been given less money in the past because of biases and false perceptions that these organizations aren’t worthy of investment.
“By showcasing their work, it helps to counteract this narrative, expose their work to a wider audience, and bring new supporters and donors,” Webb says.
5. How to survive your first year
You should think of the first year as a pilot program. It’s OK to experiment and adjust your circle’s funding focuses, Lee says. Your group should also set a goal for how much money to donate in the first year so you can work together to meet this target. But don’t panic if you don’t meet your first funding goal. You should be learning from these missed opportunities. Part of the joy of giving circles is figuring out together how to bounce back, Lee says.
AWGC holds annual retreats, usually for about six hours on a weekend day. During the retreat, they try to tackle one big question that’s stumping their giving circle, Lee says. You should end your first year with one to help iron out the wrinkles that emerged.
And if people drop out of your circle, be forgiving. Life is hectic and this can happen, Lee explains.
The power of giving circles can really be encapsulated by one word: community.
“A few of them [organizations AWGC donates to] have said to us various versions of, ‘we feel like you’re our big sisters cheering on the sidelines,'” Lee says.