Have you heard of a Donor Advised Fund (DAF?) Do you have one yourself? Haitian Project News recently ran a great article on the subject, comparing the return of money in these funds to the return on an investement in a Louverturian.
You can read an excerpt from that article below. (Spoiler alert: Louverturians win--by a lot.)
Finally, please don't forget to make your year-end gift to THP. We are still looking for $100,000 in additional support to meet our program's needs for the year, so if you happen to be in a position to give more, or give again, we will put it to excellent use!
Donor Advised Funds (DAFs) are becoming increasingly popular as a financial tool to help donors maximize the tax benefits of their charitable giving. Financial Advisors, investment companies, and tax accountants all promote these to clients as a convenient and tax-efficient way to manage their philanthropy year after year.
Why? An individual can make a contribution to their account, receive an immediate tax deduction, and then recommend grants to nonprofits at a time of their choosing, even years after they received the tax benefits from their gifts. The funds are invested in professionally managed portfolios, which are typically invested much like an endowment or retirement account, and can continue to grow tax-free over time.
Yet DAFs may underperform compared to the option of moving funds to the real purpose of charitable giving: making a difference in the lives of people. Giving faster can actually bring better returns.
Let's compare the social return of the funds required to put a student through Louverture Cleary School (LCS) and 4 years of university in Haiti, measured simply by the wealth created through their average salary, to the wealth created by letting those same funds appreciate in a DAF at 7% annual returns.
Funding a year of LCS education for a student is $2,400. A full 7 years at LCS, plus 4 more years of college scholarship at approximately $2,000 per year, means the total cost to support a student through LCS and university is $24,800.
Having come from families struggling to get by on less than $1,000 a year, the average earnings of a Louverturian with a college degree are historically nearly $15,000 a year. Twenty years after that initial investment in a Louverturian of $24,800, their cumulative earnings would be $134,000. In comparison, the funds that remained in the DAF would have generated just $67,000 over the same 20-year period.
This is, of course, the most conservative measure of the social benefit of supporting a student. There are benefits to a Louverturian’s family and their community throughout their entire time at LCS, and the impact they will have on others once they begin their professional careers is significant.
Read the whole article in December's issue of Haitian Project News.
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