Matt Nash is the executive director of The Blackbaud Giving Fund, a donor-advised fund that connects nonprofits to generous donors.
Donor-advised funds (DAFs) are revolutionizing charitable giving, supporting a surge in donations to nonprofits. In 2023 alone, DAFs facilitated over $54 billion in grants, exceeding $50 billion for the second time. In recent years, DAFs have received a bad rap, with critics citing that people only use them for tax benefits. What is overlooked is that the money people contribute to DAFs can only be used for charitable purposes.
There are different types of DAFs, but in short, a DAF is a charitable giving vehicle that allows people to contribute and then recommend grants to nonprofits. This approach to giving simplifies the process for donors so they can make charitable donations quickly and effortlessly and record their giving. People can open their own traditional DAF or contribute to a DAF, such as a workplace giving DAF, and recommend disbursements to a nonprofit.
DAFs are a relatively new way to donate, with 81% opening after 2010. Since this donation method is new to the giving landscape, the unknowns can feel intimidating compared to other methods. What fundraisers need to know is that DAF donors are willing and able to support nonprofits and should be at the forefront of fundraising plans.
As an executive director of a donor-advised fund, I’d like to share three key ways workplace and traditional DAFs support nonprofits and why they should be an integral part of a long-term fundraising strategy.
Donors Give With Intention
One report found that, during the study period, DAF donor retention was 15% higher than non-DAF donor retention, meaning DAF donors are more likely to give to nonprofits for the long term when compared to non-DAF donors. This equates to more donations and ongoing support for a nonprofit. DAF donors intentionally select a nonprofit to donate to as opposed to making several one-time donations throughout their lifetime. It’s the difference between advocating for a cause and responding to a friend’s one-time request to donate to a nonprofit. In my experience, DAF donors are typically more committed to specific nonprofits for many years. With this understanding, fundraisers can nurture relationships with DAF donors to support giving long into the future.
Donors who opt into workplace giving programs (which use DAFs to deliver funds to selected nonprofits) have consciously decided to support a nonprofit. These donors often get involved through a corporate-sponsored volunteer program and then budget a portion of every paycheck to go to the causes they care about, which can also inspire them to continue giving long after they leave the workforce.
Donors using traditional DAFs often open and actively contribute to an account during their careers where their charitable funds can grow. They use the funds to give now, and once they stop working or retire, they can continue giving even though their income has changed. These donors are actively thinking about how they give today and how to continue giving long into the future despite a reduced income.
DAFs Support Corporate CSR Programs
Many companies offer workplace giving and matching contributions to employees as part of corporate social responsibility (CSR) or employee engagement programs. DAFs enable workplace giving by collecting funds employees elect to contribute, adding employer-match contributions, and delivering them to the selected nonprofits. This simplifies the giving process for businesses—because the transactions require little management—and for nonprofits because it delivers the donation with donor information and allows nonprofits to enroll in automatic deposits and steward the donors.
Additionally, businesses utilize CSR programs to support employee engagement programs and retention efforts and further showcase their commitment to creating a better world. Data has shown that companies offering workplace giving programs have seen increased employee engagement, especially among higher percentiles. The 75th percentile engages at 33.7%, while the 90th percentile engages at an impressive 57.8%.
Businesses are influential leaders in charitable support, and workplace giving programs can introduce young donors to intentional giving. Showcasing corporate support of a nonprofit through grantmaking or volunteering events can help build a better understanding of the nonprofit’s mission and generate employees’ long-term financial support thanks to their employer’s CSR initiatives.
DAFs Amplify Giving
With traditional DAFs, donors contribute money, which can be tax deductible and is invested to provide growth in the account. With this investment boost, donors can allocate more money to their favorite nonprofits. Since money in DAF accounts can only be used for charitable purposes, nonprofits often benefit from larger donations over the long term and donors have the flexibility to manage the disbursement of funds.
With workplace giving DAFs, employers typically add a match contribution to each donation, often doubling or, in some cases, tripling the original donation amount, making each donation that much more valuable to the nonprofit.
On average, DAF donors give 96% more annually than they did before, showing the donor’s thoughtfulness and commitment to a particular cause. Using DAFs as a giving vehicle, donors intentionally set aside money and allocate it to specific nonprofits.
Many nonprofits have misgivings about DAF gifting, likely due to the lack of information available. However, it’s important to note that grants from DAFs between 2019 and 2023 grew 214 times faster than non-DAF grants, so fundraisers should see this generous group as an opportunity to maximize their impact. While DAFs are still a relatively new way to give, they are gaining popularity, and nonprofits are reaping the benefits. Fundraisers should actively encourage DAF giving and integrate it into fundraising strategies.
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