Total charitable impact

 

Why $500?

October 5, 2017

 

By Brad Caswell

 

One thing that sets Vanguard Charitable apart from other donor-advised funds is our $500 grant minimum. Donors occasionally inquire about this policy, asking if they can give in smaller increments. We take this feedback to heart, as we aim to always be responsive to our donors’ needs–our goal, after all, is to provide the flexibility and control you need to facilitate your philanthropic strategies as effectively as possible. At the same time, the $500 minimum reflects a strategic decision on our part to remain committed to our overall mission: Increasing philanthropy and maximizing its impact over time.

 

The vast majority of the nonprofits that we work with are quick to assert that all donations are welcome. That said, we recognize that costs involved in processing each contribution include time, resources, and manpower. With nonprofits often already operating on trimmed-down budgets, lean staffs, and striving to provide the most dollars to their mission, it can be much more efficient to process one $500 gift than ten $50 gifts. Larger gifts are also especially valuable for securing long-term goals, planning and budgeting for the future, providing a major boost during down times, encouraging others in matching challenges, or helping to get big campaigns started or over the top.

 

In its 2016 High Impact Giving Guide, The Center for High Impact Philanthropy speaks of a “philanthropic portfolio” to refer to the different tools at your disposal for supporting nonprofits. Different giving vehicles have different advantages and applications. For example, it is not uncommon to give a $100 direct gift to a new charity to show support, while buying time to further evaluate their performance and impact before committing more resources. In this case, direct giving may well be the most suitable approach. Recommending a grant of $500 or more through Vanguard Charitable, on the other hand, achieves different goals. In addition to reducing charities’ expenses, larger gifts lower our administrative costs, which lowers your cost of using a donor-advised fund for your philanthropy. Less overhead to run Vanguard Charitable ultimately means more money for charities and helps us realize our mission to maximize philanthropy.
 

Strategic grants are vital for a charity’s long-term planning and budgeting, and can provide a major boost during down times and campaigns.

 

Grant size was in fact a frequent topic of discussion in recent feedback from our partner nonprofits. One charity reported, “A larger donation indicates a significant commitment to the organization, which honestly makes us feel appreciated in our work and secure about being able to continue it.” Another nonprofit shared an alternate view, reflecting on the $10 contributions they received, and how appreciative they were for the heartfelt support from passionate donors.

 

I would be remiss in not mentioning that contributions of any kind–time, talent, or treasure–can play a critical role in the nonprofit industry. One of the tools that I value most in my own “philanthropic portfolio” is not financial in nature at all: By donating blood platelets to the Red Cross every month, I support cancer victims, a cause I am close to through challenges faced by friends and family. We all–charities included–want any assets we donate to be used to maximum value and effect in support of charitable missions.

 

Yet when it comes to financial contributions, there is a persistent need for substantial funds to support all manner of nonprofit work and goals. This is where a donor-advised fund operates most powerfully, and we believe that our $500 grant minimum empowers our donors to think strategically, and allows charities to operate effectively.
 

Brad Caswell is Chief Operations Officer at Vanguard Charitable.

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Comments

I strongly feel that the grant minimum should be $100 -- with whatever limitations VC believes necessary to retain efficiencies. I think this would be a great help to both the donors and recipients.

Thanks for the explanation and insight , but I would think $100 is a more appropriate minimum for donors like myself . In an effort to make smaller minimums more cost efficient , maybe make all requests actually deducted and sent out only 2-4 times a month thereby cutting down on the # of transactions at the fund level ? BTW , is there a giving app yet for the organization ?

I agree with the higher minimum to reduce transaction costs and encourage increased giving.

I feel strongly that a $500 minimum grant is too high and I feel that it should be lowered to $250 with the stipulation that any grants under $500 have to be requested on the website to minimize the costs. There are a lot of charities I have not donated to because of the $500 minimum and would have if I could have done a $250 minimum.

Lower limit to $100. What does it cost to print/mail a check? ? $0.50
Give me a break.

I agree with the overall thrust of your posting, but have a suggestion: Allow donors to make a small donation which only actually triggers if/when a certain number of other donors also make donations which reach a threshold, such as $1000 or $5000. That would keep the costs under control, while still allowing people to express a wider range of their charitable interests.

[I'm basing this on the assumption that programming this is close to free, and where your costs are mostly in double-checking that the charity is valid, and then dealing with real-world problems like checks and mailing and support for problems in same.]

it's a shame that you have this policy. that's why I use schwab for any donations I have below 500.

Sorry I don’t by this argument- I would use my account even more if it had a lower minimum grant. Fidelity is the leader in this space and they allow smaller minimums.

The $500 minimum is the reason I opened up a second DAF with Fidelity charitable. The $50 minimum there allows me to spread my annual donations across a wider swath of charities.

I usually grant $100 or more, but I find a $500 minimum to be a high floor for someone like me who is well off but does not have great wealth.

It would be helpful if that $500 minimum could be fulfilled with a monthly commitment (e.g., $42/month). Many organizations want a monthly stream of income...

Thank you

I do not agree with Brad Caswell on most of his analysis. While a large grant like $500.00 does indeed show strong support from the donor, most donors would prefer to give one or more smaller grants while they learn and monitor the receiving organisation. Also many donors use this donor advised funds to teach their children in the process and value of philanthropy. We are one such family and would like o allow and encourage our children to make small grants but a minimum of $500.00 is excessive.
With so much automation and ease of banking and donor communication(via email for example) it is unrealistic to say that small amount of grants are burdensome for the receiving non profits.
I have done so before and would like again to request Vanguard to lower the minimum to $100.00 per grant in increments of $25.00.

We would rather give a smaller amount ( say$200.00) to a smaller sized charitable organization, such as Feed My starving Children.
Whereas we would to donate a larger $ amount to the American Red Cross or such.( For which we are planning to give$5,000.00)

thanks.

I agree with 500 dollar minimum

In my opinion, it’s not the amount of a gift but the heart to want to help that matters. I strongly disagree with the $500 minimum. There are many needs in the nonprofit realm, and many nonprofits would welcome a gift of any size, never considering processing a hardship. If VCEF offered more flexibility in grant amounts more nonprofits would be served. For instance one very practical benefit would be consistent (monthly) cash flow to a nonprofit. Rather than bring forced to give twice a year, a smaller gift received monthly helps in a predictable way.
It would be a welcomed change if VCEF allowed for smaller grants!

Very helpful perspective.

Thanks for the explanation, $500 is a fair compromise for all concerned. Had a relative that supported 50+ charities @ $10 to $25 a year and got thank you letters from most, surely a net loss to most of them.

We really appreciate Vanguard's efforts to minimize costs. That is one reason why we selected Vanguard's Charitable Trust over the one offered by Fidelity. More money goes to charity and less to trust expenses. However, there are several charities that we support with direct contributions of less than $500/year. It would simplify our giving if we could make grants of $100 or more. Perhaps you can consider setting up a second trust with a higher expense ratio that allows grants of $100 or more. That might entice less affluent donors and get them in the habit of donating.