Navigating through economic uncertainty is a challenge every group and business encounters from time to time. Unfortunately, it is often the nonprofit sector that carries an even greater burden when donors limit their spending in a downturn or in anticipation of a possible downturn. However, even in uncertain times like this, there is an incredibly reliable funding source for nonprofits that many are not tapping into: Donor Advised Funds. DAFs are the fastest growing vehicle for philanthropy and have proven to be one of the most resilient & consistent sources of support, with their contributions remaining steadfast even in the face of financial adversity.
Unlike other sources of donations that may waver during economic downturns, DAFs provide a reliable stream of support for charitable causes.
The inherent financial stability of DAFs lies in the fact that the funds they hold have already been set aside explicitly for charitable purposes and cannot be withdrawn for other uses. Therefore, people’s inclination to donate from a DAF is not nearly as affected by financial pressure. Even if donors are reducing their excess spending from their credit card or bank account, their DAF giving comes from a separate budget and, often, a separate place in their mind given the money has already been “given away” from a personal financial perspective.
They are just specifying the beneficiary when they actually make a specific donation. And there’s an outrageous amount set aside in this manner already - $234 billion that’s already contributed and has to be donated to 501(c)3 nonprofits. This stability makes DAFs shine particularly during recessions when supporting charities becomes increasingly challenging.
The economic resiliency of DAF giving is not just a logical theory, it has been proven out in historical analysis. There was an overall decrease in charitable giving by individuals and private foundations during the Great Recession in 2008, but grants from DAFs actually increased that year - according to a landmark study done on Donor Advised Funds by researchers from the University of Pennsylvania and the University of Memphis in 2019 (https://www.sp2.upenn.edu/wp-content/uploads/2019/02/Heist-Vance-McMullen_Understanding-Donor-Advised-Funds_working-paper-002.pdf)
Professors Daniel Heist and Danielle Vance-McMullen note in their summary that “we find that, in general, DAF grantmaking is relatively resilient to recessions. We also find that payout rates increased during times of recession.”
This benefit of DAFs means that it’s incredibly important to make it clear that your organization can easily accept and process DAF gifts - and there’s no easier way to do so than including the 3-click Chariot Payment option on your donation forms, fundraising platforms, newsletters and anywhere else you solicit and accept donations.
This helps you discover which donors have DAFs that otherwise may have given with a credit card and greatly improve the experience & follow through for donors you already know have a DAF. Plus, you can properly steward both of these groups of high value donors by immediately receiving their name and email when a gift is made to thank them right away vs. waiting days or weeks for checks to arrive and often without proper contact details.
But, the nonprofit that’s truly investing in DAF fundraising will also proactively engage donors to encourage them to create their own donor advised funds on a regular basis so more and more donors are primed to be steadfast supporters through every period of economic uncertainty that is inevitably going to continue happening in the future.