DESPITE TURBULENT ECONOMY, CHARITABLE GIVING IS UP IN 2022
In the U.S., inflation hit a 40-year high of 8.6% in May, raising ongoing concerns that it could spark an economic recession. Interest rates are rising. The stock market has been volatile, after a long bullish run peaked at the end of 2021 and then fell to a low point in June. The economic headlines have been less than rosy. And yet, Americans are giving to charities in record amounts.
That’s according to the country’s biggest grant maker, Fidelity Charitable, which reports a record $4.8 billion of donations from its accounts in the first half of 2022, an 11% increase over the year prior.
The grant maker says that’s not all that surprising, given that the contributions were made via donor-advised funds (DAFs), which allow individuals and businesses to put money into their funds, let their investments mature over time, and then give to charities of their choice when the time is right—such as in times of humanitarian and natural disasters. (It should be noted, however, that DAFs have received criticism that they are as much a tax shelter as a vehicle for charitable giving.)
Fidelity Charitable reports that people eagerly gave to various causes in the first half of 2022, but particularly to relief efforts for Ukraine, and to the refugee, food and medicine crises surrounding Russia’s invasion of that country, all totaling approximately $128 million. Giving to José Andrés’ World Central Kitchen increased fivefold since the first half of last year, and tenfold to International Medical Corps.
In hard times, charitable giving from a financially strapped general public is usually one of first things to be cut from the budget. But because donor-advised funds (DAFs) already have funds in them, the pressure can be different.
“It creates a ready reserve for donors,” says Jacob Pruitt, president of Fidelity Charitable, explaining that when crises arise, account owners can instruct the sponsors to pay out to the causes of their choice. “Donors can quickly go into their accounts and give. And they consistently do it.”
The company notes that previous economic rocky times haven’t shown the same resilience in terms of charitable giving. For example, during the economic downturn from 2007 to 2009, giving dropped by 12%. But DAFs are relatively new and have been growing in awareness and popularity, Pruitt says. They’ve allowed people to plan in advance, and the bull market of the past 10 years has boosted people’s confidence to invest.
DAFs are also flexible in allowing individuals to invest non-cash assets, including stocks and bonds, 401(k) contributions and cryptocurrency, the latter of which saw a twelvefold increase in DAF donations last year, totaling more than $330 million.
The new record is part of a growing trend in philanthropic giving that’s bigger than just Fidelity. The 15th annual DAF report by the National Philanthropic Trust, which examined data from 976 charitable sponsors from 2020, revealed that DAF grants totaled an estimated $34.67 billion in 2021, a 27% percent increase over 2019 and the highest increase in a decade. And for the first time, the number of individual DAF accounts totaled more than 1 million.
Even more encouraging for Pruitt is that Americans tend to give the most during the fourth quarter, so he anticipates an influx of giving at the end of the year — and another year-end record, to top last year’s of $10.3 billion.
“Generosity is real,” Pruitt says. “People are seeing a need, and they’re reaching into their pockets and doing the right thing.”