Annual giving from donor-advised funds (DAFs) tends to increase over time the longer an account is open, according to a new industry study. Researchers found that unrestricted and recurring grants from DAFs tend to increase over time as well, providing nonprofits a cushion against economic volatility and an incentive for them to align their fundraising outreach strategies accordingly.
Vanguard Charitable, a sponsor of DAFs, released the findings recently as part of its report titled Why Giving Matters: Donors Give More Effectively Over Time With a Donor-Advised Fund. Data compiled for the study show total annual giving from a typical Vanguard donor account holding steady at about $20,000 for the first six years but increasing to $34,712 after seven years and $37,688 after 10 years.
Researchers assembled the findings from a combined survey of 1,527 Vanguard donor clients and 440 nonprofit grant recipients.
The number of grants also tends to go up over time from a yearly average of 5.7 during the first three years an account is open to 6.5 after three years and 7.2 after seven years before declining slightly to 6.9 after 10 years. However, even with fewer grants, donors with a tenure of more than 10 years still give more annual dollars overall.
“This trend suggests that as donors become more comfortable with their DAF, they try out a variety of charities and granting strategies in their middle years before refining their approach and focusing on slightly fewer – but more impactful – grants as they reach and give beyond 10 years,” the authors wrote.
The same data showed a steady increase in unrestricted gift-giving over time by Vanguard donor clients, who last year gave more than 7 out of 10 gifts as unrestricted. The percentage of repeat grants to a given charity tends to go up the longer a DAF account is open as well, from about 50% after two years to nearly 70% in the years that follow, suggesting donors give with more trust and confidence as they solidify relationships with their favorite charities, according to the report.
A perennial criticism of DAFs is that they provide donors the benefit of an immediate tax deduction despite there being no deadline for when the money must be distributed, prompting some lawmakers to propose conditioning the upfront tax benefits on the requirement that at least 5% of assets in a DAF be donated annually as foundations must do. However, according to the report, donors across the board agreed they give more money to charity because of their DAFs. “With donors giving more than they would have otherwise, DAFs serve the very important function of increasing the amount of charitable dollars that enter the nonprofit sector overall,” the authors wrote.
Elaine Kenig, chief communications officer at Vanguard Charitable, echoed the observation. “We are mindful of the unintended consequences of legislation imposing unnecessary requirements on DAFs, especially in this unprecedented time of need, and we do not support plans that may inhibit generous charitable giving now and in the long term,” she told The NonProfit Times.
The 27-page report can be viewed at www.vanguardcharitable.org/why-giving-matters-2023.
