Imagine having a personal giving account that empowers you to make a charitable contribution, receive an immediate tax deduction, and strategically distribute grants to 501(c)(3) organizations over time. That's precisely what a Donor Advised Fund (DAF) is - a specialized financial account designed for charitable giving.
Donor Advised Funds have witnessed an exponential rise in popularity, with over 2 million Americans utilizing this philanthropic vehicle. In recent years, DAFs have experienced unparalleled growth, emerging as the fastest-growing giving vehicle in philanthropy. The numbers speak for themselves: DAF giving has surged by 28% in both 2020 and 2021, and the number of DAF accounts has nearly tripled over the past four years. With an annual DAF giving of nearly $46 billion, it is evident that DAFs are revolutionizing the way donors engage with charitable causes and benefiting both donors and nonprofits alike.
Benefits of Donor Advised Funds for Donors:
Investment-Like Growth:
A key advantage of DAFs is their ability to provide tax-free growth. DAFs allow individuals to view their philanthropy as investments, as the money set aside can grow over time, maximizing the impact of their giving.
Flexibility and Control:
DAFs offer complete flexibility, allowing donations to be made at any point in the future without any time constraints or distribution requirements.
Accessibility for All:
Setting up a DAF has never been easier. Donors can establish a DAF through established financial service companies like Fidelity, Vanguard, Schwab, or newer providers dedicated to DAFs such as Daffy, Charityvest, Groundswell. Local community foundations also play a significant role in providing DAF services. With providers offering free accounts and even user-friendly apps, DAFs have become accessible to every consumer with internet access, democratizing philanthropy.
Benefits of Donor Advised Funds for Nonprofit Organizations:
Increased Giving:
DAFs have proven to be a catalyst for increased giving. The average DAF donation stands at $4,798, significantly surpassing the average cash donation online, which is $204. When giving from DAFs, individuals tend to be more generous, as the funds have already been allocated away.
Enhanced Donor Engagement:
DAFs can serve as a tool to deepen donor engagement. Donors who contribute through DAFs often develop a stronger connection with the organizations they support. They become more involved, exploring opportunities for volunteering and providing additional support beyond monetary donations, fostering a sense of community and involvement.
Recurring Donations:
DAF donors are more likely to become recurring donors. The structure of DAFs encourages ongoing contributions, ensuring a reliable and consistent source of support for nonprofit organizations. Furthermore, Donations through DAFs offer a higher level of reliability compared to credit cards, as credit cards often expire and individuals may forget to update their information on file with the nonprofit.
Resilience in Challenging Times:
DAFs offer stability and resilience during economic downfalls. As the funds in DAF accounts are already set aside for charity and can’t be withdrawn for other purposes, donors are more inclined to from their DAFs even during tough economic times. This reliability provides a lifeline for nonprofits during periods of financial strain.
Want to learn more about how nonprofits are engaging more with DAF donors? Check out this interview with Chariot founders, Salo & Aaron, on Demystifying DAFs.
With a staggering $234 billion held in DAF accounts ready to be donated, Donor Advised Funds have emerged as a transformative force in philanthropy. As DAFs continue to reshape the philanthropic landscape, it is clear that they have become a powerful tool in driving positive change and fostering a culture of generosity.
At Chariot, our mission is to ensure that this sum of $234 billion finds its way into the hands of deserving nonprofit organizations. With Chariot, we simplify the process, allowing donors to contribute from their DAF accounts directly on nonprofits' websites with just three clicks. Our service makes giving easier for everyone involved. By leveraging the potential of DAFs, you will not only attract more donors to give from their DAFs, but also unlock larger gifts and cultivate stronger relationships with those who support your cause. Join us to maximize the impact of your nonprofit's mission together.