Charitable giving on the rise, but mostly from the rich

After the deepest and longest drop in charitable donations in at least four decades, Americans are on track to give record amounts this year. However, the surge in charitable giving is coming almost exclusively from the wealthy, as lower and middle class incomes drop. 

After the deepest and longest drop in charitable donations in at least four decades, Americans are on track to give record amounts this year.

This past year has provided a big boost for charities in the United States, strained by rising costs and a six-year dip in giving after a pre-recession high set in 2007. Another positive trend: Social media delivered a surprise hit for a little-known charity, which has allowed it to triple its funding. But, in a sign that worries some charity analysts, the surge in donations is coming almost exclusively from the wealthy. Giving from the poor and middle class is challenged because their incomes are going down.

“When people give, they want to feel that their wealth is secure,” says Eileen Heisman, chief executive of National Philanthropic Trust, a national charity based in Jenkintown, Pa., that provides philanthropic expertise to donors, foundations, and financial institutions. “People are still worried.”

 But apparently not everyone is worried. Seven years after peaking at $349.5 billion, charitable giving looks likely to set a new record in 2014, even after adjusting for inflation. Top charities are reporting strong giving. Fidelity Charitable, an independent public charity that helps donors direct their giving, saw donations rise 27 percent for the first nine months of this year compared with the same period a year ago. 

Nevertheless, the recovery will be the most protracted since 1973, when Giving USA began compiling data. Previous recessions depressed giving for no more than three years in a row. 

The mix of giving has also changed. Before the Great Recession, donations from the affluent and ultrarich (those with a net worth of $1 million or more) accounted for almost exactly half of total giving, and were evenly balanced by everyone else in the form of millions of small donations, according to John Havens, associate director of the Center on Wealth and Philanthropy at Boston College. By 2012 (the last data available), the scales tipped toward the affluent, who were responsible for 58 percent of total giving.

The trend has more to do with trends in the economy than a lack of generosity. According to Mr. Havens’s data, adjusted for inflation, the average household donation of the middle class and poor has declined from $1,156 in 2006 to $977 in 2012. “These folks really have not recovered from the recession,” Havens says. But other studies show that the poor and middle class gave a bigger share of their income to charity in 2012 than in 2006. That doesn’t show up as a big increase because their income fell during that period. By contrast, the affluent and rich decreased the share of their income that went to charity, but their overall giving increased by $4.6 billion because their income surged so much, according to a recent study by The Chronicle of Philanthropy.

Whether the current skew toward big-money donations will continue depends on several factors, including how the economy performs and how well charities capitalize on social media, which produced this year’s most surprising charity campaign.

This summer, Internet videos of people dumping a bucket of ice water over themselves, pledging to give to a charity, and then challenging friends to do the same, went viral after a former Boston College athlete diagnosed with amyotrophic lateral sclerosis created the “ice bucket challenge” to raise funds for disease research. Almost overnight a social media campaign was born. Celebrities from Martha Stewart to Leonardo DiCaprio, former President George W. Bush, basketball superstar LeBron James, and even Kermit the Frog posted Internet videos of their dousing and pledges to donate to the cause. More than 3 million donors joined in. The ALS Association raised $100 million in 30 days – more than $115 million in all.

“It’s a wake-up call to see how social media could be leveraged,” says Rudy Flesher, an independent consultant working with the Philadelphia Foundation and former president of the Spruce Foundation, aimed at Millennial giving. “Sometimes, it takes something really outside the box to get the attention of people.” [Editor's note: This paragraph was edited to make clear that Mr. Flesher is not an official speaking for the Philadelphia Foundation.]

The new technology of giving is most familiar to Millennials, who are barely on philanthropy’s radar screen. But with the largest numbers of any generation in US history and an estimated $430 billion in annual discretionary spending, they have the potential to make significant donations.

“This is a generation that has been primed to give so much ... because of all these peer-to-peer giving [campaigns],” says Lansie Sylvia, director of engagement at Here’s My Chance, a Philadelphia-based creative agency for nonprofits. “I’m curious to know whether that will result in people being more susceptible to charitable requests or less. Will they be burned out or will they say: ‘Hey, you’re asking me for money. I’ve been [giving] since I was 12.”

If charities learn to use social media, those small donations, which have dwindled in recent years, could pick back up.