While donor advised funds (DAFs) have long been a mystery to the public, their impact is just too powerful to ignore. Research from The 2024 DAF Fundraising Report shows that once a donor starts using a DAF account instead of other ways to give, like a credit, their annual giving to an organization they already supported increases by an incredible 96 percent. The reason so many donors aren’t aware of DAFs and 37 percent of DAF accounts go unused in a given year? We’re just not talking about it enough.
To start the conversation in a way that maintains momentum, it’s important to begin with the basics. That’s why we sat down with DAF experts to explore what a donor advised fund actually is, its many benefits to donors, and how nonprofits can kick off or improve their DAF-related communications. This eye-opening talk featured:
Megan Hyman, CEO at the Dallas Jewish Community Foundation
Mitch Stein, Head of Strategy at Chariot
Let’s dive into the definition, amazing upsides of a charitable giving account, and how you can spread the word.
(Pro tip: DAF Day is a national day of DAF giving taking place on October 10th. You can get ahead of the game by joining the DAF Day movement for free right now.)
What is a donor advised fund (DAF)?
In the most relatable terms, a donor advised fund (DAF) is like a 401(k) or IRA for charitable giving.
Think of it this way: Just like the money and assets you funnel into a 401(k) are explicitly designated for retirement, the money and assets you deposit into a donor advised fund are reserved for donations for 501(c) 3 charitable organizations.
When you deposit money or assets into a donor advised fund account, you receive an immediate tax deduction for the donation amount. Better yet, you avoid any associated capital gains tax on appreciated assets you contribute, and your investments in the DAF account grow tax-free over time.
Making a grant or donation to a charity from a donor advised fund is easier than ever thanks to fresh tech that eliminates traditional steps.
Until recently, you’d have to navigate away from a donation form to your DAF account portal, look up the organization and take several extra steps. From there, the donor-advised fund takes care of sending it off, but the nonprofit doesn’t know anything about the gift until it arrives in the mail.
Now, tools like DAFpay eliminate the middle-person experience by enabling DAF donors to give from DAFs directly in just three clicks from a button on a nonprofit’s donation form - greatly improving the donor and nonprofit experience.
DAFs answer donors’ toughest questions
Charitable giving can be challenging because that act of doing good lives at the intersection of two important questions:
How much can I afford to give?
What organization should I give to?
DAFs take that first question off the table. With money already set aside, donors feel free to dole out support because the budgeting decision is already taken care of. Now they get to just focus on the joy of giving!
As for choosing the organization, donors can support their go-tos, along with nonprofits that are new to them, especially at a time when natural disasters, humanitarian crises, and political events prompt us to pitch in at a moment's notice.
Why donors love DAFs (once you tell them to get one)
You may think that you need to encourage existing DAF donors to contribute to their accounts, but chances are, they’ve got plenty to give. They're just waiting for your organization to ask for it.
DAFs come with instant benefits—and not just for nonprofits. Here are some top reasons why donors enjoy having a DAF. (And by all means, pass this along!)
All of your giving is in one place
Lots of busy working folks and parents want to participate in philanthropy, but packed schedules and mile-long to-do lists can easily get in the way. DAFs streamline giving, enabling you to effortlessly set aside money for charitable giving and easily organize tax information. For example, Daffy even folds the DAF giving process into a simple and convenient mobile app.
Giving consistently is a breeze
Take a set-it-and-forget-it approach to the causes you care about. DAF donors can automate DAF gifts for the schools, community nonprofits, and organizations you support year-round.
Tax deductions are surprisingly easy
Changing tax codes prompt donors to explore new ways of getting the most from their donations. DAFs enable donors to claim a deduction the moment they give to their DAF account—even if they didn’t actually give to a nonprofit from it yet.
When you set up a DAF, you don’t need to search for receipts in your inbox, desk drawer, and wherever else you may have stashed them. Your DAF account serves as a single record for every gift, which makes—at least this aspect of tax time—delightfully painless.
DAFs help you set goals around your giving
One of the first things you do when opening a DAF account is decide how much you’d like to set aside for the causes you care about. When you set goals to retire or buy a house, you tend to contribute more to those savings accounts. In the same way, a DAF asks you to think about what you’d like to achieve as a philanthropist and automate contributions to your DAF account accordingly.
DAFs empower you to be the generous person you are
Generous folks like yourself want to support critical causes whether the market is up and down. Fortunately, lean years can still be charitable ones when you have a DAF account because you’ve already set money aside
Busting myths about DAF holders
Common misconceptions about DAFs can prevent organizations having conversations with donors who would enthusiastically join in. As a matter of fact, DAF donors have grown 79 percent compared to a 6 percent decline in non-DAF donors. The secret? Include everyone in your DAF solicitations—just segment your messaging accordingly.
DAFs are just a tax-avoidant wealth hoarding tool
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False. We need to dust off this old myth and show it for what it really is. While DAFs do provide tax benefits, their real value for the vast majority of DAF users lies in the ability to promote greater giving. By reserving funds for charitable purposes, DAFs empower donors to give more easily and in larger amounts than they would on a one-off basis. Offering the ability to support all types of causes consistently, DAFs encourage a lifestyle that drives impact through philanthropic action. It’s also important to keep in mind that once money is contributed to a DAF account, it can’t be withdrawn for any reason. The only way it leaves the account is as a grant to charity.
DAFs are reserved for high-net-worth donors
False. It’s no wonder DAFs are an unknown force in philanthropy. In the past, people learned about them from a high-end wealth manager or financial advisor, which means everyday donors missed out on the opportunity to give with a donor advised fund account.
Today, DAFs are available to everyone, not just folks with financial advisors who require multi-million dollar minimums. DAF activity is exploding through recent company offerings, financial advising services, and fundraising solicitations from plugged-in nonprofits.
Only older donors use charitable giving accounts
False. While DAF donors have traditionally skewed older, new technology welcomes younger donors to embrace philanthropy. This opens a whole new host of opportunities to speak to DAF giving in new ways. You can educate donors about the ease of DAF apps, add DAFpay buttons to your online donation forms, and inspire matching gift campaigns that bring a welcome social aspect to the DAF giving experience.
10 ways your nonprofit can boost DAF giving
At the heart of organizations that thrive through DAF giving is a passion for sparking important conversations. Check out these actions you can take today to help you, your team, and your donor community build a culture around DAF giving.
1. Work directly with a community DAF
A community foundation brings together nonprofits and donors around a common cause and shared vision. Community foundations can take on all sorts of views—regional, religious, and identities, to name a few.
A great way to start? Apply for a grant from a community foundation that aligns with your mission. In addition to becoming eligible for crucial funds, the folks who manage these foundations can get familiar with your organization and play matchmaker with the DAF holders who’d love nothing more than to be your nonprofit’s champion.
2. Make DAF giving a family affair
There’s something extra gratifying about social giving, and supporting shared causes with family members can be a lifelong bonding experience. Some DAFs allow entire families to contribute and give from an account, so be sure to let donors in on this special way to give that inspires your most passionate supporters from future generations.
3. Promote DAF giving to corporate sponsors
You already have companies supporting your organization through fundraising events and volunteer initiatives, so why not suggest a DAF addition to their slate of employee benefits? Many companies are beginning to tap into charitable giving by enabling employees to deposit funds into charitable giving accounts directly from their paychecks. And lots of employers are even giving a match.
4. Present DAFs as a vehicle for all kinds of gifts
Make it even easier for donors to give stock, ETFs, mutual funds, and crypto through a DAF account. By encouraging donors to deposit funds and assets into a charitable giving account and then give through the DAF, your organization can help donors streamline the giving process on both ends for every way they want to support your organization.
5. Adopt DAF giving tools that ease giving and spark relationships
When your nonprofit adds a DAFpay button to your donation forms, the donor can give without a DAF managing the transaction. So rather than waiting for the funds to be distributed and the DAF to confirm if the donor wants to be contacted, your organization gets the funds and the contact information right away, which means that “Thank you” can reach the donor when it matters most—the same day they give.
6. Build a professional advisor committee
Some of your greatest DAF advocates are already in your donor community. Recruit financial advisors who support your organization to introduce their clients to DAFs and educate them on the benefits of leveraging charitable giving accounts to give cash, stock, and other assets.
7. Educate donors just how easy DAF giving can be
Right now, $230 billion in assets are set aside in DAF accounts. Tell your donors about the latest innovations in DAF giving so they can put those funds to work at your organization.
For example, add a DAFpay button to your donation form and show them that giving from your DAF is now as easy as paying with a credit card.
From there, keep tabs on DAF apps and their growing capabilities, from managing employee giving programs to launching matching gift campaigns.
8. Inspire donors to design their giving plan around what’s ahead
Invite your donors to invest in the future of your mission beyond the coming year. Rather than only asking for an immediate need, communicate how their DAF gifts can impact your mission in years four, five, and six. With regular updates and impact data, they’ll relish in all you can achieve as you commit to the cause together.
9. Encourage matching gift campaigns
Social giving can be lots of fun, and since DAFs are available to everyone, you’re missing out by not sharing about the magic of matching gift campaigns.
DAF holders can pledge any amount from their DAF and ask their network to give, promising to double their amount. DAF holders will love bringing together colleagues and friends for their favorite cause and bask in the joy of driving even more impact than they would have if they gave from their account without inviting others to join in.
10. Join the DAF Day movement to rally your community around DAF giving
DAF Day is just around the corner, but you can trek toward October 11th well prepared by joining the DAF Day movement right now. This single day of giving brings donors, DAFs, and nonprofits together for an unprecedented stream of DAF giving to the causes we care about most.
Need messaging? Look to the DAF Day toolkit you’ll receive when you sign up for free to help you pull together a DAF Day campaign in a flash. And for donor communications beyond DAF Day, we hope the best practices and donor benefits listed in this post can give you a solid foundation for how you kick off and grow the DAF conversation.
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