Scenario Planning: Examining the Trends in Charitable Giving

The word philanthropy derives from the Ancient Greek meaning to love humanity. Annually, the World Giving Index tracks how that care manifests itself worldwide by asking, “Have you done any of the following in the past month?”
  • Helped a stranger or someone you didn’t know who needed help?
  • Donated money to a charity?
  • Volunteered your time to an organization?

Despite the challenges of the past three years, giving remains core to who we are as human beings. Helping a stranger reached its highest recorded level in 2021, with 62% of adults helping someone they didn’t know. One in three (35%) individuals around the world reported donating to a charity in 2021. And, one in four people globally (23%) volunteered in 2021, up from one in five in 2020.

At schools, we hope to encourage these giving behaviors as they are what makes communities strong. In this post, I will examine one aspect of giving—donating money—and what trends could impact it in the years ahead. Given quickly changing economic conditions, as well as societal polarization, school leaders will need to scenario plan to get ahead of any negative impacts or leverage emerging opportunities. I’ll suggest some “what if” questions to explore in building best- and worst-case scenarios for schools.

What if…the number of donors continues to decline?

Although charitable giving has been strong over the past few years, the number of donors is in decline. According to the Philanthropy Panel Study (PPS), sponsored by Indiana University’s Lilly Family School of Philanthropy, in 2018, the number of American households that gave to charity dropped below 50% for the first time since the PPS began tracking data in 2000. Although there was an increase in donors during the first year of the pandemic, according to the Fundraising Effectiveness Project (FEP), the number of donors industrywide had fallen back to 2019 levels by the end of 2021.

The reasons for the decline are not entirely clear, but there are factors at play including declining trust in core U.S. institutions, growing financial pressures on disposable dollars, and the option to support causes in other ways such as person-to-person giving or social investing. Also, the number of nonprofits has grown dramatically over the past few decades, increasing the competition for charitable dollars.

These factors raise significant questions for schools. Will dependency on a smaller number of donors make the school more vulnerable in a downturn? Or does it allow for stronger relationships that build donor loyalty? Could dependency on a few donors open the door to donors seeking more influence on school operations? Additionally, the PPS identified that both interpersonal trust and giving rates declined simultaneously throughout much of the past two decades and both fell more for younger Americans (age 30 or younger) than older Americans. Is building trust essential to strong giving in the future?

Suggested action for schools: To begin building scenarios, review your school’s giving patterns over time. Has the number of donors decreased? If so, are there any patterns as to who has stopped giving? Also, what is the profile of your most loyal givers? Are there external or internal factors that could influence their continued ability or willingness to give? Develop best- and worst-case scenarios.

What if…economic conditions continue to impact Americans’ financial health?

The past year has been economically difficult for many people. Inflation is at a record level, and the stock market remains volatile. Although 2021 was a record giving year, the inflation-adjusted total marks a decrease from 2020. Giving numbers for 2022 are not yet available, but looking at the second quarter, giving is strong, driven primarily by major donors. And donations on GivingTuesday 2022 hit a record. According to the GivingTuesday Data Commons, giving in the U.S. “totaled $3.1 billion representing a 15% increase compared to GivingTuesday 2021, and a 25% increase since 2020,” with 37 million adults participating.

Historically, charitable giving has remained stable, even when conditions are somewhat adverse, as they are currently. According to a study conducted by PNC, from 1990 to 2019, the annual growth rate of charitable giving was negative only three times (2008, 2009, and 2013). That means charitable giving levels, even in bad years, tended to remain stable year over year. And, further, when examining these adverse periods, data also suggests that fundraising growth generally recovers in about two years.

Suggested actions for schools: Continue to build out your scenarios by imagining the potential impacts on charitable giving if economic conditions continue to deteriorate. Imagine the impacts over various time frames and with various types of donors. Specifically, are there certain industries, age groups, or other factors that will impact who is able to give and how much?

What if…community polarization impacts giving to your school?

As culture wars continue to rage in the U.S., many are concerned about the resulting impacts on charitable giving. Research suggests that there is some correlation between political ideology and charitable giving, but little hard data on how that may be disrupting or fueling current giving to charitable institutions. Anecdotal evidence suggests that small gifts to nonprofits may be affected but major donors, who are really invested in an organization, are more unlikely to curtail giving. In its publication, 11 Trends in Philanthropy for 2022, the Dorothy A. Johnson Center for Philanthropy suggests that philanthropy will be embroiled in culture wars for the foreseeable future, and that this will call on fundraisers to devote more time to explaining their mission and desired outcomes to donors. They also note: “There is a danger that, as political power shifts across parties, the party in power will seek to restrict giving in ways that will support their ideological stance and damage the credibility of the philanthropic sector as a whole.”

Suggested action for schools: Continue to build out your scenarios by imagining how various culture war issues could impact giving to your school both negatively and positively. Given your school’s mission, which issues could impact different types of donors? How can you leverage your mission to attract new donors? What kinds of resources will you need to keep communication lines open and school outcomes transparent?

What if…accepting cryptocurrency could reveal a new group of donors?

According to the Johnson Center Trend report, “Five years on, nonprofits are still struggling with the idea of cryptocurrency. The asset itself can be volatile, the technology behind it confusing, and new cryptocurrencies are created all the time.”  However, cryptocurrency is opening up a new demographic of givers who are quite generous. According to a Fidelity Charitable survey, “people who invest in cryptocurrencies were more likely than traditional investors to donate at least $1,000 to charity in 2020.” Accepting crypto assets is not without difficulty though. It is still a volatile asset, and processes can be complex and insecure. But as millennials become a larger part of the donor base, this may be a move that schools will need to make…with knowledge and caution.

Suggested action for schools: Expand your scenarios by considering how charitable giving could be impacted by accepting crypto assets. Explore what your school would need to do in terms of processes and practices to move in this direction safely and effectively.

As you continue scenario planning, consider these additional questions around the changing advancement landscape:

  • What if competition for advancement personnel becomes steeper?
  • What if artificial intelligence provides new processes and opportunities for advancement work?
  • What if new tax law changes impact charitable giving (either positively or negatively)?
  • What if collaborating around development with our other schools reveals new donor possibilities?

Good luck developing scenarios that will help guide actions to guarantee long-term sustainability for your school and the spirit of giving.

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Donna Orem

Donna Orem is a former president of NAIS.