Donor-advised funds (DAFs) now represent nearly 10% of all charitable donations, totaling an impressive $52 billion in 2022, according to Giving USA. This rise comes as traditional giving faces headwinds; charitable giving overall dropped by 2.1% in 2023, largely due to inflation and economic uncertainties. Inflation, which was 8% in 2022 and 4.1% in 2023, wiped out gains in giving during both years. While giving technically increased from $547 billion to $557 billion in 2023, inflation adjusted it to a 2.1% decrease. The economic squeeze impacted everyday donors, leaving affluent households – bolstered by a strong stock market – to shoulder a greater share of giving. Nonprofits, therefore, have increasingly turned to DAFs, a tool popular with wealthier donors. Though DAFs offer flexibility for donors by allowing immediate tax benefits without time-bound obligations for distributing funds, critics argue that they enable the hoarding of charitable dollars during times when nonprofits urgently need resources.
Despite economic pressures that have reduced individual giving by 2.4% in 2023, DAFs offer a resilient source of donations. This is crucial as individual giving, which once accounted for 73% of all donations in 2013, fell to just 67.2% in 2023. To tap into the potential of DAFs, nonprofits must streamline the donation process by including DAF options alongside traditional methods like credit card payments. Feeding San Diego, for instance, struggled with rising food prices and a higher number of people needing help, but turned to institutional funders and foundations to sustain its services. Similarly, nonprofits that simplify DAF donations, ensuring that their donation pages prominently feature options for DAF gifts and clear EIN numbers to avoid errors, will be better positioned to attract more donors and avoid costly mistakes.
As traditional forms of giving falter, DAFs are seeing consistent growth, especially among affluent donors who contribute significantly to causes such as education, arts, and public-society benefit organizations. Contributions to foundations, for example, grew by 10.8% in 2023, driven largely by high-net-worth individuals. Organizations like Vanguard Charitable reported that DAF donors contributed over $3 billion in 2024 – a 45% increase from the previous year. While this rise contrasts with the overall decline in individual giving, DAFs enable smaller, recurring gifts as well. Smaller platforms like Daffy have seen an increase in users, many of whom contribute more steadily through their DAFs compared to traditional one-time donations. This shift highlights how nonprofits can leverage DAFs to build more sustainable funding streams even as the broader economic climate remains uncertain.
Contrary to popular belief, DAF donors aren’t limited to the wealthy. The average DAF gift is around $1,000, with a median gift size of $300. Many DAF donors make smaller, recurring donations, offering nonprofits like Feeding San Diego a steady stream of funding – $65,000 each month from 1,300 recurring donors. However, nonprofits must navigate ongoing economic uncertainties, such as inflation and potential political turbulence leading up to the 2024 election, which could impact donors’ willingness to give. The unpredictability surrounding tax laws and political leanings can influence when and how much donors contribute to their DAFs, adding an extra layer of complexity for nonprofits seeking to maximize donations during the crucial end-of-year fundraising period.
By keeping DAFs top of mind for donors and integrating them into campaigns and communications, nonprofits can better weather fluctuations in traditional giving. Encouraging recurring DAF donations and focusing on relationship-building with donors through events and personalized outreach can help stabilize fundraising efforts even as economic and political factors add uncertainty to the philanthropic landscape.