5 Things People Get Wrong About DAFs

Donor-advised funds (DAFs) can sound more complicated than they really are. In reality, a DAF works a lot like a savings account, except it’s designed for your charitable giving. As a first step, you donate money by adding it to your account. You’ll get an immediate charitable tax receipt in return. And as a second step, you decide how you’d like to put those, now charitable, dollars to work. 

That separation, between donating to your account and using the charitable dollars, gives people more time and space to become confident in their giving decisions. I’ve seen donors of all ages and income levels find joy in using DAFs.

DAFs are new to most people. As a result, there are a lot of myths about them. So, for DAF Day, let’s tackle some of the biggest ones.

Myth #1: DAFs are only for the wealthy

Fact: That used to be true. In the past, setting up a DAF required heavy back-end administration, which made it economical only for large accounts.

Today, technology has enabled DAFs to become accessible. At Charitable Impact, anyone can open a free Impact Account. Whether you’re contributing a small monthly gift or a major gift using shares, you get the same powerful tools to manage your giving.

Myth #2: With a DAF, I can’t build relationships with charities

Fact: You’re in charge of how you manage your relationships and profile. With Charitable Impact, when you give to charities, you can choose to remain anonymous or share your name and/or contact information. That way, you decide how personal (or private) your giving experience is.

Myth #3: DAFs are just for stockpiling charity money

Fact: The vast majority of donors don’t “park” money in their DAFs. In fact, research is showing that many give more and more regularly because they’ve set aside funds for charitable use. Take Amanda, a teacher who contributes $100 a month with her spouse. From their Impact Account, they make automatic monthly grants to their house of worship and a local food bank while also giving their kids small charitable allowances to choose where to donate.

DAFs can make giving a family value, not just a tax strategy.

Myth #4: DAFs are confusing to manage

Fact: If anything, DAFs make giving easier by taking away a lot of the administration related to giving. With a Charitable Impact Account, which we typically just call an Impact Account, you can:

• Centralize tax receipts
• Track donations and grants in one place
• Manage recurring gifts to charities you care about
• Get support from a team that understands giving
• Decide when you want to share your name with charities and when to stay anonymous

For people who want to make giving a part of their life, it’s easier to manage their donations with a DAF than without one.

Myth #5: DAFs are only for long-term planning

Fact: Flexibility is the whole point. Some donors make grants right away after donating into their DAF, while others choose to take more time between those two decisions. I see that happen in my own household with my two young boys; one immediately gives away his charitable allowance to a charity he supports, while the other likes to build the account and make larger, albeit less frequent gifts to specific causes close to his heart. And I’d bet that’ll evolve and change for each of them over time. 

Another example is how a retired business owner might donate appreciated securities into a DAF, letting the assets grow while they consider causes to support. Or a local company might use a DAF to streamline their quarterly employee matching program.

No two giving stories look the same, but the same tool can empower them all.

The bigger picture

When a retiree in Victoria, a teacher in Winnipeg and a local business in Halifax can all use the same giving infrastructure as a major philanthropist, it challenges the old idea that philanthropy is only for the wealthy.

On this DAF Day, let’s remember: you don’t need to give away a lot of money to benefit from a DAF. You just need to make giving a part of your life.

Ready to get started? Open a free Impact Account today.