Talking Shop: Giving Amid Inflation: What Fundraisers Need to Know and Do
Fluctuating gas prices, creeping inflation, swings in mortgage rates: in 2022, the global economy has shifted rapidly, leaving fundraisers to grapple with change and uncertain implications for charitable giving.
“During the earliest days of the pandemic, information wasn't just changing daily, it was changing many times during the day. That is not what's happening now but we're still seeing comparatively quick changes in real time,” says Bill Stanczykiewicz, Senior Assistant Dean for External Relations and Director of The Fund Raising School at the Indiana University Lilly Family School of Philanthropy.
“Fundraisers need to pay attention, not just on an annual and quarterly basis but almost on a weekly, a day-to-day basis to be following these economic trends, because the fluctuations are happening much more quickly than usual.”
Read on for Stanczykiewicz's perspective on how inflation and recessions impact giving—and what fundraisers should be doing now to prepare for more ambiguity.
How do inflation and economic shifts shape giving?
There’s the wealth effect of charitable giving: when people have more money, they can donate more money. And there are different indicators that we can watch, especially the S&P 500 stock markets. That's one of the strongest correlations our school has found: when the market goes up between January and December, charitable giving the following calendar year tends to go up—not by the same percentage, but the same trend direction. And the opposite also is true: when the S&P 500 goes down January to December, charitable giving tends to go down the following year, not by the same percentage point, but the same trend direction.
So, one of the strongest wealth effects for charitable giving in previous years has been these huge double digit increases in the S&P 500 in the previous calendar year. At the end of September, the S&P was down 20%. That's a wait-and-see number for now. Let’s wait until the end of December and see what the change is for all of 2022. But that's important to consider.
What might a global recession mean for fundraising?
As our research colleagues like to say: if you’ve seen one recession, you've seen one recession. However, charitable giving on average only goes down by about one half of one percent after adjusting for inflation during recessionary years.
That’s just an average, though; during the Great Recession [from 2007 to 2009], charitable giving went down about 5%, adjusting for inflation. But think about that: The Great Recession was the worst economy since World War II, and charitable giving only went down 5%, despite the economic calamity we saw. So charitable giving remains resilient, even during a recession and that's important to remember.
The research also shows (and again, every recession is different) when the recession ends, charitable giving tends to go up the next year—not always, but often. So there’s this latent desire to get back to consumer behavior and a latent desire to return to charitable giving as well.
But we know inflation hits our lowest income and moderate-income neighbors the hardest. All donors are important and all gifts are important. We should give every person an opportunity to experience that joy of giving, regardless of their household wealth. So it should be concerning that inflation effects donors in the lower income level the most.
What can fundraisers be doing now to prepare for coming uncertainties or a recession?
Number one is to do your best to budget with a surplus in mind. This is something that we teach at The Fund Raising School. With a strong fundraising case for support, a responsible budget, and a reliable gift range chart, there are ways to increase the likelihood of a budget surplus every year, which then can go into an operating reserve.
The other aspect is to maintain close relationships with your donors before the recession starts. Once the recession hits, donors tend to stay with the nonprofits to which they have the strongest relationship. The hardest donor to attract during an economic downturn is a new donor. Existing donors will stay closest to the nonprofits with whom they have the highest levels of trust. So, stewardship and donor relationships are important, as always.
What kinds of conversations should fundraisers be having with donors now?
The number one predictor of fundraisers' effectiveness, regardless of the economy, is their relationship with their donors. Stewardship is important always; it’s just the correct thing to do to honor people for making their charitable gifts, but it also has that effect of encouraging people to continue their giving and maybe even give at higher levels over time. Maintaining relationships with donors is always the top predictor of how fundraising is going to go in the future.
Fundraisers should be talking to their donors about how inflation is affecting them: “Oh, you're a business owner: how is inflation affecting your business? Is this changing your charitable giving strategies? Are you more slow-moving your charitable giving this year?” When you have a good relationship with a donor, those are very natural questions—not right away, but as part of an ongoing conversation. That's going to help fundraisers plan into the next fiscal year or two with this comparatively fast-changing economic data that we’re seeing from one week to the next.
Fundraising happens at the speed of trust. Fundraisers continually need to be open and honest. In higher education we all want to boast about our high-achieving alumni, our wonderful faculty making new discoveries, and all the great developments that we have. But donors want us to be transparent. They want to hear about our challenges. They themselves are having challenges: they’re looking at their household budget; this could be affecting their place of employment or business they own; they’re looking at their retirement portfolio and stock holdings. So, if you're not including the kind of challenges that you're facing, donors aren't going to be as willing to fully trust you. Certainly, continue to share that good news, but let them know the steps you're taking to be resilient.
About the author(s)
Meredith Barnett is the Managing Editor at CASE.
Article appears in:
DIGITAL ONLY ISSUE - Workplace Wellness: What institutions, leaders, and individuals can do to address burnout and support well-being. Plus: mindfulness strategies to find focus, putting data in action, fundraising amid inflation, and more.