Nonprofits face headwinds on Giving Tuesday with consumers strapped for cash

Nonprofits hoping for significant donations on this Giving Tuesday are holding their breath as consumers are straining under stubborn inflation, high interest rates and the end of COVID-era relief programs like the pause on student loan repayments.

Giving Tuesday, a global day of giving and generosity held each year on the Tuesday after Thanksgiving, is a boon to nonprofit charities, but it could be facing headwinds this year as consumers deal with challenges facing their household budgets. Inflation remained at 3.2% in October – well above the Federal Reserve’s 2% target rate even as it continued to decline from a 40-year record of 9.1% in June 2022 – and the Fed’s efforts to tamp down inflation have pushed interest rates to the highest level in more than two decades.

“Many nonprofits are in a precarious place right now, with government contracts that haven’t been adjusted in a decade, increased demand for their services, increased costs, and declining donations,” Rick Cohen, chief operating officer for the National Council of Nonprofits, told FOX Business. 

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Despite those challenges, Cohen said that nonprofits have optimism about donors contributing during the 2023 giving season and noted that gift-giving to nonprofits does not always have to consist of financial contributions.

“Many in the nonprofit sector are cautiously optimistic this giving season. We know the generosity of people in our communities, where so many give to help others, even when it might be a hardship for themselves,” Cohen explained. “Giving also takes many forms that aren’t always captured in totals that can be tracked.”

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A report by Giving USA found that total charitable giving in the U.S. declined in 2022 to $499.3 billion after two consecutive years of record-setting generosity. The report noted that the dip in charitable giving coincided with a drop in the stock market and mounting economic uncertainty.

“Much of the declines in giving by the everyday donor are because of economic realities,” Giving USA chair Josh Birkholz told FOX Business. “This will continue to be the case. We’ve seen a trend of the dollars increasing by those with the ability to give.” 

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Birkholz added that Giving Tuesday has been a net positive for nonprofits even as the count of annual donors has declined in recent years.

“While there has been a trend of declining donor counts in the United States, Giving Tuesday has been a bright spot. People respond to the community nature of giving. They enjoy being part of something,” Birkholz said. 

Birkholz explained that smaller nonprofits dependent on average donors who live in their community are struggling more than the bigger charities.

“Charities with strong track records of solving big problems continue to grow. Smaller charities with more dependence on local, everyday donors seem to struggle more to maintain their numbers. The higher net worth donors tend to prioritize solving big problems over meeting immediate needs,” he said. He cited a desire to solve food insecurity over the long-term rather than feeding those dealing with hunger in the present moment as an example of this dynamic.

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Cohen noted that even small donations can make a big difference for community nonprofits to address their respective missions.

He also added that while Giving Tuesday and the giving season more broadly garner a significant amount of attention, the needs that nonprofits seek to address are year-round and that their ability to provide services is enhanced by recurring monthly donations.

“While there is a lot of attention on the “giving season,” those needs are year-round, so we hope people will consider recurring monthly donations. If there’s an organization that they usually donate $100 to every holiday season, what if they switch to a $10 monthly contribution?” Cohen said.