Your Ultimate Quickstart Guide to DAF Fundraising

This guest post comes from Talia Gill, Engagement Marketing Manager at Chariot. Chariot is the payments company dedicated to Donor Advised Fund (DAF) giving. DAFpay, Chariot’s 3-click DAF payment option, allows donors to give with their DAF anywhere they are inspired to give online.

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Donor-advised funds (DAFs) are the fastest-growing vehicle for charitable giving. In 2022, $229 billion was sitting in DAFs. Over the past decade, payouts from these funds have surged by 600%, surpassing $52 billion.

Despite their rising popularity, many nonprofits are still looking to better understand the specifics of DAFs—what they are, who uses them, and how to leverage them effectively.

What Is a Donor Advised Fund?

A donor-advised fund, or a DAF, is a tax-advantaged financial account for charitable giving. These accounts allow donors to contribute assets, receive immediate tax deductions, and then recommend grants to 501(c)(3) organizations. 

Opening a DAF is like having your own personal foundation. Donor-advised funds allow donors to set aside funds for charity now and maintain flexibility in deciding when they want to give to their favorite charities over time.

The assets can be invested and grow tax-free, similar to an HSA or 401K account. Further, a donor only gets one tax receipt when they contribute to their DAF account. They don’t need to manage tax receipts from individual organizations every time they issue a grant out of their account.

Important note: a donor who uses a DAF has already decided how much money they want to give to charity. That means that rather than deciding if they have the budget to give every time they are asked, a donor can instead focus their efforts on identifying the most impactful organizations to support. Many individuals who choose to give 5% or 10% of their income to charity (either for religious or philosophical reasons) prefer DAF accounts because they make it simple to manage their philanthropic efforts. 

Common misconception: “A DAF is a tax haven.” 

Tax havens are places where people move their money to avoid paying taxes. While contributing to a DAF account does offer the typical charitable giving tax deduction, once money is put in a DAF, it can never be used for personal use. The donor does have flexibility as to when the money will ultimately be granted to a nonprofit. 

Who Uses a DAF?

Incorporating donor-advised funds into your nonprofit’s fundraising strategy is not just about targeting one type of donor—many different types of people can and do benefit from DAF giving. 

Baby Boomers are most frequently familiar with the advantages of DAFs, but what’s truly exciting is the rapid growth among younger donors. According to Fidelity, the fastest-growing segment of DAF users are millennials.

As younger donors enter the market, tech-forward DAF providers and platforms like Daffy and Charityvest are seeing an increase in popularity. Many DAF providers are also either lowering or removing the minimum donation required for an individual to open a DAF account. Furthermore, DAF donors tend to give more than their non-DAF peers. According to the 2024 DAF Fundraising Report released by Chariot and K2D Strategies, the size of an average DAF gift in 2023 was 19x larger than that of a non-DAF gift. When a donor starts giving from their DAF, their annual giving to the same nonprofit increases by 96%.

Common misconception: “DAFs are only used by the old and ultra-wealthy”

In fact, donors of all ages and various income levels are taking advantage of DAF accounts. 

Why Do DAFs Matter?

Nonprofits are facing a crisis: individual giving is going down. In 2022, it fell by 6.4% year-over-year. Fortunately, DAFs are following the opposite trend—they grew by over 9% that same year. For many organizations, the increase in DAF revenue is more than offsetting the decrease in non-DAF revenue!

DAF donors continue to be an exceptional source of support across various metrics:

• DAF donors give more on average than non-DAF donors. When a donor starts using their DAF, their giving increases by 96%. 
• The donor retention rate amongst DAF donors is 15% higher than non-DAF donors in the same study period. 
• More and more donors are using DAFs. Over the past four years, the number of DAF donors has increased by 79%, while non-DAF donors have decreased by 6%.

Also important to note: while individual giving fluctuates with economic uncertainty, DAF giving tends to shine during these time periods. When a donor puts money into their DAF, that money has to be given to charity. This stops donors from viewing charitable giving as an expense, particularly during turbulent times; they’ve already set aside these funds to give! 

Common misconception: “You can just sit back and wait for DAF gifts to come in.”

On the contrary, 42% of recently surveyed nonprofits reported that they are “not soliciting or promoting DAF gifts.” Yet the same survey found that simply asking for DAF gifts can boost a nonprofit’s DAF revenue 2.2x. 

How Can Nonprofits Raise More From DAF Donors?

Raising more from DAFs is easier than most nonprofits think! Here’s a simple four-step plan that anyone can use.

• Educate:  Ensure your whole team and board knows what a DAF is and how to make it easy for donors to give to your organization via a DAF account. 
• Simplify: Highlight easy DAF payment tools like DAFpay, which Neon Fundraise is integrating directly into their donation forms in early October. After that date, donors can give via their DAF without ever leaving your website. 
• Communicate: Actively promote DAF giving. Take cues from successful campaigns like Pan-Mass Challenge, which has raised 3.5M in revenue from over 5K DAF gifts in their first eight months after integrating DAFpay.

• Steward: Make sure you have methods to capture complete donor data, especially email addresses, for ongoing DAF donor stewardship. There’s a big opportunity for major and planned gifts, too—a third of DAF donors choose to leave their funds to a nonprofit organization instead of naming a personal beneficiary. 

Common Misconception: “There is no easy way to accept DAF gifts online. It’s an offline form of giving, and that’s all it can ever be.” 

New DAF payment options, like DAFpay by Chariot, allow seamless online DAF fundraising.  

When Should I Start Asking for DAF Gifts?

There’s no better time than now to focus on optimizing your DAF strategy, especially with DAF Day around the corner on October 10, 2024.

Both Neon Fundraise and Neon CRM are investing in the DAF process by integrating DAFpay into their giving forms, with Neon Fundraise launching DAFpay in early October. These advancements are designed to enhance the ease and efficiency of managing donor-advised funds, offering new opportunities to maximize your impact and engagement.

By effectively understanding and engaging DAF donors, your nonprofit can access a rapidly growing source of charitable giving, enhance your fundraising strategies, and meaningfully improve your fundraising results.