A recent report on charitable giving in the U.S. has caused some to wonder if the widely publicized income gap has turned into a generosity gap.
Do wealthier donors have something in common with the Grinch?
According to The Chronicle of Philanthropy, high-income earners give a smaller share of their income than those with lower incomes. Specifically, those who earned $200,000 or more gave 4.6 percent less of their income in 2012 than they did in 2006. During the same period, those who earned less than $100,000 annually donated an average of 4.5 percent more of their income.
Despite these statistics, don’t rush to question the generosity of high-income donors. While the percentage of income these individuals donate is smaller, the impact of their charitable gifts is profound. The Chronicle study reported the total amount donated by high-income earners rose by an inflation-adjusted $4.6 billion between 2006 and 2012, to a total of $77.5 billion.
High net worth donors make a major impact.
Another recent survey highlights the widespread generosity of wealthier donors. The 2014 U.S. Trust Study of High Net Worth Philanthropy found that 98.4 percent of high net worth households made charitable gifts in 2013, the highest percentage since the survey began in 2006 and three percentage points higher than was reported in 2011. For purposes of the survey, high net worth households are defined as those with annual incomes of $200,000 or more or at least $1 million in assets excluding the home.
Additionally, the $68,580 average gift size among those surveyed was 28.1 percent higher than in 2011. The average gift among those worth $5 million or more rose by an even greater percentage—41 percent—to $166,602.
Looking to the future, continued improvement in investment values and donors’ renewed financial confidence will likely translate to even higher levels of giving among the wealthy. Some 35 percent of high net worth individuals surveyed in 2013 plan to give more in the near future, 11 percent more than in 2012.
The 80/20 rule.
It’s important to remember that, although the percentage of income given to charity is currently lower among high-income donors, the dollar amount is significantly higher.
In general, charities can expect 80 percent of their donations to come from the top 20 percent of their donors. While it is critical to encourage gifts from all members of your constituency, charitable gifts from high net worth and high-income donors can go a long way toward meeting a charity’s fundraising goals.
Encouraging gifts from these individuals should be a priority among fundraisers. Consider Sharpe’s Data Enhancement Services to learn how to identify your high net worth and high-income donors.