How charities can combat a drop in donations due to the cost of living crisis

Katherine Moss
Picture by Tom Parsons

According to the Office of National Statistics (ONS) survey, the cost of living has increased by 25 percentage points compared to last year: 23% of adults reported that it was very difficult to pay household bills, 30% reported that it was difficult to pay housing costs (mortgage, rent, or shared ownership), 17% of the adults reported an increase in borrowing compared to the previous year, and 43% reported that they would not be able to save money in the next 12 months.

Cutting down on household expenditures is the only option, and charitable giving is one of the first to be struck off the list. This might not be what an average charitable person wants but rather has to do, creating a gap between intention and behaviour. Zarak Mirza from Kent Business School comments on how charities can overcome this and continue to flourish even in the face of a cost of living crisis:

“The increase in donations for the Ukrainian cause is an anomaly in the current constrained charitable environment. People are prioritising charitable giving to the most pressing need, or at least what they perceive it to be. Ukrainian invasion indirectly affects everyone morally or/and financially (cost of living has been affected through supply chain issues) providing an intrinsic and extrinsic factor that motivates giving. Essentially, donations are being diverted toward Ukraine with non-givers donating due to heightened awareness about the conflict (through news media outlets, and social media platforms).

“People essentially give for altruistic, or feel-good reasons. These reasons help convert intentions into giving. The present financial crunch, for the time being, has deferred the intention and reduced the giving behaviour. Studies have shown that those who intend to give might not follow through due to a lack of resources. Charities would need to budget their expectations in the context of the increase in the cost of living.

“What options are available with charities? Charities can adopt the wait-and-see policy, hoping for the cost of living to decrease, and donations to increase, but this might be unlikely for the foreseeable future. Alternatively, charities that lack the financial space would need to reassess their strategies. Charities would either need to adopt a “whatever you can spare” policy or decrease the weekly/monthly amount they ask from givers. These adjustments might make giving affordable in the current economic environment reducing the gap between intention and behaviour. The reality is that the present economic crunch would require charities to choose between low but regular donations and high but sporadic giving.

“Charities might also need to reconsider how to project their message in the current economic context. The message needs to resonate not only with the individual’s personal experience/preference but also with their capacity to give. Highlighting the current economic environment’s impact on those in need might provide the extrinsic motivation for givers to compare with their situation and continue to budget for charitable giving. Unless the charities decide to redefine their strategies, they will continue to face a decline in donations and there is a danger that this “concerning trend” might become permanent.”

Zarak’s research focuses on three broad areas. One is to explore how heuristics affect decision-making in organizations and consumers and how it impacts market interactions. The second is to understand the role of behavioural bias in the development and adoption of management approaches across private and public organizations. The third is to understand to what extent donors’ biases affect charitable giving.