Overall, inflation is going to be a serious problem in our sector this year and probably for several years to come. Unfortunately, during times of increased economic challenges, many funders cut down on their giving in order to protect their endowments for the future, saving for a rainy day while ignoring the current monsoon. As wealth and investment advisors start encouraging foundations and donors to do just that, I am imploring foundations to not listen to these voices.

In fact, even maintaining the same level of giving is not enough. With inflation, the value of money decreases, so you’re actually giving less than you committed. If your foundation committed to giving a grant of $100,000, for example, you’re really only giving about $92,000 when inflation is factored in. To counter for this, you need to give an additional 8% or more to whatever you’re currently giving. A grant of $100,000 should be $108,000. These additional funds will make a significant difference for many nonprofits, their staff, and the people they serve.

Funders also need to consider equity implications. Inflation doesn’t affect everyone equally. It most severely hurts lower-income families. In our sector, it will be organizations led by Black, Indigenous, AAPI, Latinx, women, disabled people, LGBTQIA+ people, rural communities, and the their staff and the people they serve who will be most affected. These are organizations that have already been struggling through decades of lack of investment from philanthropy. They now face additional and disproportional challenges that come with inflation.

If you just made your grant selections, increase the amount by 8 or 10% (or more). If you already distributed funding, cut some supplemental checks. Do not ask for additional application materials or reports.

During these times of financial hardships is when nonprofits really need funders to step in and provide some stability. That is one of the most important roles you play. Over the past two years of the pandemic, we’ve seen many funders playing that role, increasing their funding and support and removing burdens and bureaucracy. This thoughtful approach has been critical for many nonprofits’ being able to survive when their communities need them most.

We need funders to have the same thoughtful approach to address inflation.

Read the full article about inflation by Vu Le at Nonprofit AF.