How can charities maintain donations as inflation bites?
November 14, 2022
5 min read
Rising inflation is putting charities under strain. We investigate different initiatives that could help them to keep funds flowing.
Welcome to Attest Investigates! In this series we use the Attest platform to test your burning questions and explore literally any topic. As a scientist, I am obsessed with experimentation, empiricism and using data to make decisions, so if you have something that needs investigating, get in touch at [email protected] – Jeremy King, CEO and Founder, Attest
Charities are facing a perfect storm, with growing numbers of people relying on them for support, while fewer people are able to afford to donate. On top of that, the rising cost of living is also increasing underlying operating costs.
So what can charitable organizations do to keep funds flowing? We decided to dig into the issue by using Attest to survey 500 consumers in the US and 500 in the UK. We wanted to explore the ways charities and nonprofits could help people to keep giving through this difficult time – by asking the donors themselves.
Flexibility will help people to keep giving; charities should make it easy for donors to change how much they give, and skip payments.
A simple solution is reducing the baseline suggested donation amount and inviting people to donate less, to include a higher volume of potential supporters.
Wealthier donors are looking for different initiatives, like tax incentives, payroll deduction and interest donation schemes.
The UK is the hardest hit by a decline in donations
Before we got started with the solutions, we wanted to take a better look at the problem – just how much has the rising cost of living affected charities? In the UK, we can see that 27.6% of people have decreased their charitable donations in the last 12 months. That’s versus the 16.8% who have increased them, resulting in a net decrease of -10.8%.
In the US, we actually see the complete reverse; a net increase of +10.8%. Only 13.8% of people have decreased the amount they donate to charity, while 24.6% have increased their donations. However, the US has a far higher percentage of people who haven’t donated to charity at all in the last 12 months (27.2% versus 13.8%).
What we might surmise from this is that there’s a starker divide between rich and poor in the States. So those who can afford to donate to charity respond by giving more, and those who can’t, give nothing at all. And the data backs this up, 87.1% of those with a household income of $90,000* have donated in the last 12 months, and 42.4% have increased their giving.
*This demographic accounts for 26.4% of the overall sample
Flexibility is central to maintaining support
What people most require in order to keep giving is flexibility; 30.2% of respondents in the UK said being able to change the amount they give each month would help. It was also a popular solution in the US, where 27.2% wanted more control of value. This is something that could be implemented by shifting away from standing orders to variable direct debits or card payments; tuning up/down with each supporter’s circumstances (but aiming to avoid losing a donor entirely).
In addition to the flexibility to change the amount they give, donors would also like to be able to skip monthly donations if they’re having a difficult time; 22.8% of respondents in the UK and 20% in the US said this would help. Some charities have already launched this initiative, sending donors a text message every month to which they can respond ‘skip’.
But one of the most effective actions for charities to take is actually the easiest to implement; simply inviting people to donate smaller amounts from the outside, potentially sacrificing a few units of value to include a higher potential volume of supporters. This is very close to the concept of price elasticity in marketing; the ratio of the percentage change in total demanded of a product to the percentage change in price.
Organizations often set their baseline suggested donation quite high, and this can be off putting for those with less to give. But starting with lower expectations seems likely to lead to more people committing – especially in the UK, where 28.6% of people say it would make a difference (versus 20.8% in the US)
Different solutions for higher earners
American charity givers skew wealthier, and that’s underlined by the fact that tax incentives were named as the top solution for helping them to further their support. Just over 32% of people in the US said tax breaks would help them support charities, in comparison to 23% in the UK.
Likewise, other similar solutions were more popular with American donors than with British ones. These include the ability to donate the interest from their savings, which 18.8% supported compared with 8.4% in the UK. Donating directly from one’s salary also had greater support (21.0% versus 16.4%).
And if we, once again, look at respondents with a minimum household income of $90,000, we get a clearer picture of how many higher earners might adopt these initiatives (see graph below). A significant 43.2% would appreciate being able to give to charity through a payroll deduction, for example, so it’s worth charities communicating with employers and employees about how this is done.
Something that would help higher and lower earners alike is being able to round up transactions and donate the difference. Round up technology is already being used by some retailers, like McDonald’s, but charities could be pushing more businesses to get on board.
Banks and financial service providers are great candidates too – anywhere charities can take a regular stream of small contributions that can really add up without a material impact or decision for target consumers. More than 31.0% of Americans and 26.0% of Brits are supportive of rounding up, so even if it’s only a few pennies at a time, it’s likely to add up.
Jeremy founded Attest in mid-2015, following 9 years leading global teams across industries at McKinsey & Company. He holds an MBA from Harvard Business School, originally trained as a scientist with a focus on genetics, ecology and animal behaviour, and also helps to improve state primary schools with his charity work.