Stelter’s Senior Gift Planning Consultant, Lynn M. Gaumer, J.D., shares fundraising solutions for 2022’s economic uncertainty.
Experienced fundraisers may remember high periods of inflation during the late 70s and early 80s—when inflation was more than 14% and mortgage rates were in the double digits. Others may remember the great recession between 2007 and 2009. But for many fundraisers, today’s inflation and stock market falls are uncharted territory.
Experts disagree on whether we are headed for a recession. But we’re most certainly experiencing volatility.
What History Tells Us
A strong economic climate helped motivate giving in 2021; the mid-year economic outlook for 2022 is not as promising. A combination of high inflation, gas and food prices, along with a declining GDP and stock market may hinder giving this year.
Historic data from Giving USA shows that:
- During years of economic growth, average giving has increased by 4.7%.
- During the years of economic downturn, average giving decreased by 0.5%.
We know that giving increases when donors feel good about their financial stability. Lower-income and middle-class households are likely to struggle as prices increase. Wealthier households may be less impacted due to fixed-rate mortgages, less debt or a greater ability to work from home to limit gas expenses.
In periods like this, donors of all demographics are likely to become more strategic about their giving. They may reassess the amount and organizations they give to, or find creative ways to give.
3 Strategies for Economic Downturn
You can help your organization navigate high inflation and a volatile stock market with these tips:
1. Invest in your existing donors. Stewardship has always been core to fundraising. Maintain and deepen your relationships. Strong donor relationships can help nonprofits become more resilient.
Anecdote: A 2018 study by Giving USA found that legacy donors want ongoing, personalized stewardship to help them stay connected to the impact of their gift. Provided they had been properly thanked, most legacy donors also reported being open to annual solicitations as a way to “feel useful” and provide immediate support.
2. Encourage percentage giving. Some of your donors may have named you as a beneficiary in their estate plans for a certain dollar amount. During periods of high inflation, the value of these gifts will decrease. Encourage your donors to name a percent, such as 10% of the value of their estate. This will keep the gift proportionate to the asset value.
3. Meet with your annual giving staff. Encourage your staff to reach out to your annual donors to increase their monthly or yearly contributions to account for inflation. If, for example, a donor gives $1,000 per year and inflation is at 7%, that donor would need to give $1,070 to make the same impact on your organization.
Popular Gift Vehicles During Economic Uncertainty
Historically, the stock market tends to do well in periods of high inflation. Although stocks had a rough start to 2022, we can’t forget that the S&P rose almost 27% in 2021. Its average yearly return is 11.66% over the last five years. Individuals may be more inclined to give from their wealth such as appreciated stock, real estate or business interests than make a gift of cash.
Donors who are concerned about the impact of inflation may be more open to gifts after their lifetime like gifts in a will or beneficiary designations. Again, encourage percentage giving. A fixed sum of money does not allow for changes in the estate’s value or inflation.
Donors may wish to use funds that have already been set aside for charitable giving. According to the National Philanthropic Trust 2021 DAF Report, there is an estimated $160 billion in donor advised funds. Encourage your donors to recommend grants (or recurring grants) to your organization.
Some donors may look for fixed income in a period of volatility by creating life income gifts such as charitable gift annuities or charitable remainder annuity trusts. (Some donors, however, may be hesitant given that the annuity rate will not adjust for inflation.)
Donors may be interested in a charitable remainder unitrust because payouts increase if the trust assets grow, allowing a donor’s income stream to keep up with inflation.
Keep Calm and Fundraise On
Periods of high inflation or a volatile stock market can create opportunities for your organization and your donors. Use this time to communicate giving that reflects today’s climate, and work with your internal team to develop a strategy to minimize the impact of inflation on your goals.