Why charities need DAF donations
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Illustration: Sarah Grillo/Axios
U.S. charities are facing a problem: Their donations are overwhelmingly coming from rich Americans. Casting a wide net doesn't reap the rewards it used to; instead, nonprofits have to concentrate on maximizing the amount they're given by a small number of bigger donors.
Why it matters: Those rich Americans are giving increasingly from DAFs — donor-advised funds that make it easy to optimize tax deductions.
- But charities are only slowly focusing on DAFs as a key source of donations.
The big picture: DAF operators get their revenues from managing money, not from giving it away. As such, they have little incentive to encourage more donations.
Driving the news: DAF payments company Chariot is partnering with a slew of major nonprofits, including the ACLU, the American Cancer Society, March of Dimes, and the International Rescue Committee, to announce DAF Day — an attempt to focus attention on DAFs not as a place to store money but rather as a wallet from which to give money.
- On DAF Day, set for Oct. 10, donors will be asked to make a gift from their DAF; to publicize both the charity they're supporting and the DAF they're using; and to share how much they hope to give from their DAF in a single day.
Follow the money: Only half of American households reported giving to charity in 2018, the most recent year for which data is available, down from 66% of households in 2000, per the Indiana University Lilly Family School of Philanthropy.
- Within the individual donation category, 75% of all contributions came from less than 3% of donors.
- Giving by individuals declined by 14.7% in real terms between 2021 and 2023, per Giving USA — but giving from DAFs went up.
What's next: Charities are beginning to specifically target DAFs as sources of donations.
- Per Chariot's 2024 DAF Fundraising Report, donations from DAFs are much higher than average — and donors who switch to giving from their DAF turn out not only to give more but also tend to be much more loyal.
The bottom line: Whether or not DAF Day 2024 induces a significant increase in DAF giving, expect charities to give more attention to their DAF donors in the future.
Editor's note: This article has been corrected to remove a reference to the People for the Ethical Treatment of Animals.
