October 1, 2025
DAFs Were Meant To Move Money, So Why Do They Keep Acting Like Banks?
Donor-advised funds (DAFs) are charitable investment accounts that allow donors to make a tax-deductible contribution up front, invest those funds for potential growth/return, and then recommend grants to nonprofits over time. And they’re not just growing, they’re exploding: With assets now surpassing $251.5 billion, DAFs have outpaced the scale of most private foundations and are becoming one of the most influential and untouchable forces in philanthropy.
While they were created to make giving easier and more strategic, for many nonprofits, DAFs are starting to feel like well-padded parking lots for generosity: Money goes in fast but doesn’t come out nearly as quickly. And as nonprofits are pushed to do more with less, that mismatch between donated dollars and deployed impact is becoming harder to ignore.
When Philanthropy Stalls
Let’s start with the facts: In 2023, DAF assets grew by 9.9%, while total DAF grantmaking dipped slightly to $54.77 billion (from $55.53 billion in 2022). The average payout rate hovered around 24%, flat from the previous year. At the same time, new contributions dropped nearly 22%, meaning much of the asset growth came not from donor activity, but from investment performance.
Put simply: The money is multiplying, but it’s not moving.
And the scale matters. With 1.78 million individual DAF accounts and average balances rising to $141,120, the implications are massive. If current trends continue, some analysts predict that DAFs could represent half of all U.S. charitable dollars by the end of the decade.
That means the rules—or lack of them—around how DAFs function are shaping the future of philanthropy in real time.
This Isn’t What Giving Is Supposed To Look Like
At our nonprofit, we build sustainable water systems across East Africa. Every day, we see how timely investment, even modest gifts, can dramatically improve lives: a health clinic that can finally sanitize equipment, a school that keeps girls enrolled because it has toilets, a community that no longer walks 10 miles for a jerrycan.
These are not theoretical benefits. They are tangible, time-sensitive outcomes. But they don’t happen when funds meant for public benefit are held in limbo behind well-meaning intentions and administrative red tape.
The real problem isn’t bad donors. Most people who open DAFs genuinely want to give. But the system they’re giving through doesn’t push for urgency. There are no legal requirements for annual disbursement. Many DAF sponsors benefit from keeping assets under management. And well-intentioned donors, left without clear deadlines or encouragement, often delay decisions in search of the “perfect” gift while communities wait.
We Don’t Need Perfect Giving; We Need Participating Giving
This delay has a cost. It’s borne disproportionately by small and mid-sized nonprofits, by grassroots groups, by organizations led by women and people of color, and especially by global nonprofits like ours, which often lack the proximity or visibility to be prioritized by major donors’ advisors.
And it’s not just about fairness. It’s about impact. Money sitting in a DAF doesn’t reduce food insecurity. It doesn’t build wells. It doesn’t pay a teacher or train a midwife. And yet, for too many donors, “I’ve given to my DAF” has become a full-stop sentence. Let’s be clear: Moving money to a DAF is not the same as moving it to a mission.
So, What Needs To Change?
We’re long overdue for a shift in mindset, and maybe in regulation, too.
- Donors: Set your own payout goals. Don’t let your funds sit. If you’re not sure where to give, support the organizations that have already shown you their impact.
- DAF Sponsors: Build default timelines. Offer match incentives for timely disbursements. Publish annual payout rates across your platform, not just feel-good success stories.
- Nonprofits: Be louder. Challenge the myth that waiting patiently for DAF money is just how the game works. Call in your donors with honesty, not fear.
- Policymakers: It’s time to consider DAF-specific payout requirements. If charitable giving qualifies for immediate tax breaks, it should carry timely public benefits, too.
A System Designed For Movement Shouldn’t Be This Still
DAFs were built to be vehicles for giving, not vaults. But right now, they’re acting more like banks: interest grows, urgency fades, and the people they’re meant to serve are left knocking on a locked door.
Nonprofits don’t need more applause for our resilience. We need resources, and we need them now. If we don’t start shifting the norms around how DAFs function, the philanthropic sector risks becoming something it was never meant to be: a performance of generosity, detached from its purpose.
The money is there. The needs are urgent. It’s time to unpark the philanthropy.