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What Happens to Charitable Giving During a Recession?

As news continues about high inflation, cost of living increases, and stock market volatility, there have been many discussions about a future recession. For the philanthropic sector and businesses running charitable giving programs, the main questions have been: how does this news affect us? What impact will a recession have on charitable giving? 

In this blog, we’ll review the following common questions about recessions and giving: 

  • How charitable giving trends change with the economy
  • The potential for giving growth, even during a recession
  • How to use technology to maximize a limited giving budget

We’ll first look at the big-picture economic landscape and how it’s impacted charitable giving in the past. Then, we’ll take a more focused look at how charitable giving may change during the next recession and how companies can maximize their giving budgets.

How Charitable Giving Trends Change With the Economy

According to Economics Observatory, charitable giving trends track with the stock market. It spikes during booms and then dips during recessions. However, economic booms are more likely to lead to increases in donations than recessions will reduce them. Economists speculate that the pattern is due to people donating any windfall income during good economic conditions. With poor economic conditions, charities intensify their fundraising efforts due to increased financial needs, increasing the value of donations in the eyes of potential donors. 

The consistency of donations through previous recessions over the past 40 years indicates that companies and individuals view charitable giving as a primary budget item no matter what. This trend bodes well for potential charitable giving growth even during the next recession and high inflation rates, which we’ll cover next.

Potential for Giving Growth Even During a Recession

Charitable giving will never go to zero. No matter the United States GDP, giving has remained at approximately 2% for over four decades now. People will give roughly the same percentage of their income or wealth to charity; it’ll just be smaller when the entire S&P 500 is down. While charitable giving decreases as businesses’ net operating income and individual incomes decline, charitable giving never zeroes out. 

Also, some donors will be looking to donate even more during a recession due to nonprofit organizations’ increased need for financial support. Charities need money to continue supporting their communities, running daily operations, and providing for their staff and employees. Fidelity Charitable’s research backs up this desire to give more. Their studies found that 75% of donors surveyed were worried about other community members, and 64% were worried about nonprofits. 59% of the donors were willing to give more in 2022 amidst threats of a recession. This marks a similar pattern to their donor base increasing their donations by 24% in 2020 despite the pandemic-driven recession.

Another indicator that charitable giving is likely to remain consistent—or even grow—during an economic downturn is how individual and corporate donations have grown substantially in the past decade. In 2017, giving in the United States totaled about $300 billion. Meanwhile, giving in 2021 totaled a near-record $485 billion despite surging inflation rates. This 61.66% increase in donations in just five years signals that people will continue to show their support through crises in their local and global communities. People have consistently shown up for each other through COVID-19, social justice movements, the Ukraine War, and many more calamities. As long as individuals and businesses have easy and affordable ways to give and support people when they need it the most, they will.

How to Use Technology to Maximize a Limited Giving Budget

When your brand has to operate with fewer resources than before but still meet expectations for mobilizing community support, technology can help maximize a limited giving budget. 

For example, Givinga’s Philantech® platform allows brands to need less labor and time to operate their charitable giving programs. It reduces the administrative workload of setting up a giving program and handles charity vetting, payment processing, tax documentation, and automated reporting. We also provide features that further empower and engage employees and consumers to give.

Our giving technology brings financial technology capabilities to the philanthropic space. It helps businesses cultivate brand affinity and the ability to give more by lowering high costs, eliminating hidden fees, and reducing the labor needed to operate a giving program. Plus, it can provide support by: 

  • Inspiring a culture of giving to attract and retain top talent and reduce time and money spent on training new employees. 83% of millennials would be more loyal to companies that help them contribute to social and environmental issues.
  • Delivering a return on impact as brands that invest in social issues and instill trust in their customers see more than a 20% average increase in their sales revenue.
  • Building purpose into their brands, giving them the ability to report their philanthropic initiatives as part of their greater CSR goals.

All in all, using giving technology is an excellent and cost-effective way for businesses to give back to their communities, regardless of stock market conditions. Philantech® provides the opportunity for brands to have a strategic giving program, which can help enable business growth and support community members even during times of uncertainty.

Our free demo teaches how to get the most out of your giving budget. Schedule one today!

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