High cost of living dictating trends in charitable giving

Posted on 28 Feb 2024

By Greg Thom, journalist, Institute of Community Directors Australia

Return on investment philanthropy charity giving

The widening income divide in society is being reflected in charitable giving trends, as the cost-of-living crisis continues to impact the number of donors.

New research has revealed that while four out of five Australians have adjusted their lifestyles to some extent in reaction to cost-of-living pressures, giving is increasingly stratified by income, education and location.

In a presentation to the Fundraising Institute Australia annual conference in Brisbane, not-for-profit fundraising and marketing consultant Martin Paul, a director at More Strategic, outlined his company’s latest research on cost-of-living and giving trends.

Key findings:

  • The higher people’s income and giving levels were, the less concerned they were about making cost-of-living adjustments to their lifestyle
  • A rise in annual giving has been driven by well-educated higher income earners
  • Charities are increasingly reliant on a dwindling number of the same donors for support
  • An increasing number of people are leaving charitable bequests in their wills
  • While more people say they intend to donate online, the actual level of online giving has declined over the past year
  • Trust in charities is second only to trust in emergency services
Martin Paul
Martin Paul of More Strategic

“In our recent study 81% of people had made changes to their lifestyle, such as eating out less,” said Mr Paul.

“However, it’s a very different story for those on above average incomes where less than half have made changes and 60% are not worried about their financial futures.

“We are seeing a greater divide in society and in giving.”

Mr Paul said that while 75% of Australians reported they were fearful of the future, the Donor Confidence Index, a composite score of five factors influencing giving, has improved by 7% since May 2023.

“Our data shows that most people are not sacrificial in their giving, with 80% giving less than 1% of their annual income to charity,” he said.

“In fact, the median percentage donated of those that do give is just 0.38%.”

Mr Paul said this highlighted the challenge for fundraisers in trying to entice more people to reach into their pocket and give to a good cause.

“We might say ‘It’s only the cost of a cup of coffee,’ but no one stops having the coffee.

“We [fundraisers] are in the most competitive and discretionary market in Australia. We have three supermarkets and five banks but more than 50,000 NFPs competing for almost entirely discretionary income."

Cost of living
The cost-of-living crisis is having an impact on charitable giving trends.
“We must continue to make the case for the value we add to society and the personal emotional and identity benefits people get from giving.”
More Strategic director Martin Paul.

Mr Paul said according to More Strategic’s analysis, overall fundraising levels have increased by 16% since 2018.

Investment into fundraising has increased by just 5% meaning a decrease in real terms when allowing for inflation.

Mr Paul said this meant despite the difficult economic times, it was vital for NFPs and charities to continue to invest in their fundraising activities.

“Resist the temptation to cede to your chief financial officer to reduce investment,” he said.

Mr Paul said his company’s fundraising benchmarking data revealed half the sector’s contributions came from individual giving – with more than 75% of that total from regular donors.

The analysis of accounting information provided by several larger charities showed 20% of income was derived from bequests and 10% from events, with the remainder coming from high value fundraising – major gifts, the corporate sector and grants.

“The challenge for the sector is that the bulk of the income is coming from fundraising programs with a lower rate of return [relative to investment],” said Mr Paul.

While events offer a return rate of $2.99 and direct marketing activities $3.14, major donors returned $11 and bequests $18.70.

“Over the five years to 2022 the fastest growth was in those high value areas – largely because that is also the area [in which] fundraisers are increasing investment the fastest,” said Mr Paul.

Fundraising Institute Australia CEO Katherine Raskob.

“Our challenge is the 50% of our income is coming from a mechanism that delivers a little over a 3 to 1 return on investment.”

Mr Paul said NFPs were accelerating their investment in the higher value fundraising programs and seeing appropriate rates of growth.

“However, the fastest increase in investment is in bequests (albeit from a low base), but the returns have not been realised…yet.”

Mr Paul said the enormous transfer of intergenerational wealth predicted to occur in Australia over the coming years provided an enormous opportunity to increase the level of giving.

“The future for bequests is very encouraging, with almost four times the amount of money to be transferred to half the number of people, according to the Productivity Commission’s intergenerational transfer of wealth report – but it will take time.”

PHOTO 2024 02 28 17 04 19
Attendees at the 47th annual FIA conference in Brisbane.

Mr Paul said not only was it vital to encourage donors to give more, but the sector also needed to find the “magic key” to inspire those who don’t already give to start doing so.

“We must continue to make the case for the value we add to society and the personal emotional and identity benefits people get from giving.”

FIA CEO Katherine Raskob said that the research points to both challenges and opportunities for fundraising.

"Critically, it also points to the continued need to invest in fundraising, both from a systems perspective and a people perspective,” she said.

“The purpose of annual gatherings such as the FIA Conference, which is now in its 47th year and hosting 1,200 attendees in Brisbane this week, is to ensure that fundraisers continue to advance their skills so that they can make greater impact.”

Become a member of ICDA – it's free!