5 reasons stock donations are the major gifts your nonprofit needs to succeed

Magda Cychowski
January 22, 2021
min read
5 reasons stock donations are the major gifts your nonprofit needs to succeed

Hundreds of successful nonprofits are shifting their focus to stock fundraising because organizations that accept non-cash gifts grow six times faster than those that don’t. And, with the added tax savings for donors, gifts of stock are often major gifts and larger than cash gifts. The average gift of stock is worth more than $5,000.

Want to start receiving these major gifts? Download our sample stock donation phone scripts to jumpstart your conversations with donors.

Here are five reasons your nonprofit will benefit from stock donations:

1. Nonprofits accepting stock donations grow 5x faster than those accepting only cash.

A study done by fundraising expert Dr. Russell James found that securing gifts of non-cash assets, such as stock, makes nonprofits significantly more successful.

Organizations who strictly take cash donations grow by just 11% over a five-year period. On the other hand, those that take any non-cash assets grow by 50%, and those that take appreciated securities grow by 66%. And this applies to organizations of all sizes and sectors.

Stock donations aren’t just an investment in your organization’s future — they can also help your nonprofit with its immediate fundraising needs. Five years might seem like a long time to see growth, but James’ research also found that in the same year nonprofits began accepting donations of non-cash assets, their total average gift size increased by 26%.

2. Stock gifts are major gifts.

If you only ask for cash, your organization will miss out on a large pool of untapped fundraising dollars. According to the U.S. Census, 97-99% of all wealth is held in non-cash assets. Furthermore, the economy is currently in an 11-year bull market, meaning that many long-term assets have grown despite the stock market falling in early 2020.

With that in mind, it’s not surprising to learn that the average stock donation is $5,230 — a much larger amount than the average cash donation, which is around $1,000. At FreeWill, the average stock donation on our Stock Gifts Tool is even higher, at an incredible $31,000. If you can educate your donors on the benefits of stock giving, and make it easier for them to donate stocks, you will increase the average size of gifts to your organization.

3. Your pool of potential stock donors is about to get even bigger & more charitable

Over the next 25 years, an estimated $68 trillion will be passed on as the large and wealthy Baby Boomer generation passes away. This will be the largest wealth transfer in human history and an unprecedented opportunity for philanthropy. Millennials will be the generation inheriting the majority of this wealth, and they’re investing in stocks more than ever before. In 2020, Millennials accounted for nearly 20% of the stock market’s trades, up almost 5% from 2019,making them ideal prospects for stock donations. And, when a donor inherits stock, the cost basis on the shares changes. Instead of using the cost that the former owner paid, the cost basis becomes the share value on the date the former owner died. This can increase the potential size of a stock donation tremendously if the shares have grown significantly in value.

The best part about this?  Millennials are almost twice as charitable as Baby Boomers. And they’re more interested in creative forms of giving that allow them to maximize their impact. Since income levels are rising quickly for Millennials working in tech, law and consulting, their capacity to give is also increasing — a $10K gift from a Millennial is much more valuable than a $10K gift from a Boomer, because they’ll be able to donate even more in the future. Reaching these potential donors early in their adult lives can reap fundraising gains for decades to come. That’s why targeting your Millennial supporters and educating them about stock giving now will be crucial to your organization’s future success.

4. Most of your donors already own stock — all you have to do is educate them to get these gifts.

80% of affluent and high net worth donors own appreciated assets, such as stocks, mutual funds, or bonds, but only 21% of those donors have contributed these types of assets to charity. Use email to let donors know about the benefits of stock donations, and the larger impact they could make.Also, include information about the process required to donate stock on your website. By educating your donors and making consistent appeals, you’ll begin to receive more stock gifts over time.

5. Giving non-cash assets changes your donor’s mindset and makes them more charitable.

Once a donor makes their first gift from non-cash assets, they now consider these assets as a source for potential future contributions. If you can effectively maintain relationships with stock donors through proper stewardship, you’ll continue to receive more generous, recurring gifts.

Furthermore, according to the same Russell James study mentioned earlier, people who think about giving out of their wealth instead of their disposable income donate more. Donors are more likely to give irregular, unearned gains (i.e., their investments) than regular, earned work income. This is due in part to the mental framing of the gift.

For example, when a donor considers a $1,000 gift against the amount they have in their checking account today, it may seem too large a percentage of their spending money. When they consider this same $1,000 gift as a percentage of their total wealth (all cash savings and non-cash assets, real estate, etc.), the gift feels like a relatively small percentage of their net worth.

Learn more about how the FreeWill Stock Tool can help your organization capture new, major stock gifts.