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Transcript
- Lucas: Alright, Luna, I want to talk about something that caught my eye while looking at the latest CPI numbers. The June CPI came in at 332.6, down a bit from May, but core inflation is still sticky. And there's one area where inflation is quietly doing a lot of damage that almost nobody talks about. Luna: Let me guess: it's not your streaming bill or your gym membership this time. Lucas: Right. It's charitable giving. Think about it: when you donate a hundred dollars to a food bank, that money has lost about twelve percent of its purchasing power since 2021. So the same donation now buys fewer meals, fewer shelter nights, fewer vaccines. Luna: That's a sobering way to look at it. I've never heard anyone frame it that way. Usually we just think about inflation eating our own wallets. Lucas: Exactly. And the ten-year breakeven inflation rate is at 2.25 percent, which is down from previous peaks but still meaningfully above the Fed's target. So the erosion isn't going away anytime soon. For donors, the question becomes: how do you make sure your giving retains its impact? Luna: Is there a strategy? I mean, people can't just give more every year to keep up. Lucas: Some can, but not everyone. One classic approach is to use a donor-advised fund. You contribute assets—ideally appreciated stock—when you have a high-income year, take the full tax deduction immediately, and then distribute the grants over time. The money inside the DAF can be invested, so it grows and hopefully outpaces inflation. Luna: So you're essentially front-loading your giving and letting the market do the heavy lifting. Lucas: Exactly. And if you donate appreciated stock rather than cash, you avoid the capital gains tax, which is an extra boost. Say you bought Apple or NVIDIA a few years ago—donating those shares directly to a DAF or a charity means the full market value goes to the cause, and you get a deduction for that value. Luna: That's a double win: you avoid tax on the gain, and the charity gets more than if you'd sold and donated cash. Lucas: Right. But there's another layer. Nonprofits themselves feel the pinch. Their costs for food, rent, utilities, and staff are all rising. A donation that would have covered a month of rent for a family now covers maybe three weeks. So the same dollar does less work on both ends. Luna: That makes me wonder: should donors adjust their giving amount by the inflation rate each year? Like, if you gave $1,000 in 2021, you'd need to give about $1,120 now just to keep the real value constant. Lucas: That's exactly what many financial advisors recommend. I've seen it called 'inflation-adjusted giving.' And some donors even set up recurring gifts that automatically increase annually by the CPI. It's a simple way to maintain real impact. Luna: What about the timing? Is there a best time to donate to maximize impact? Lucas: Generally, earlier is better because inflation erodes value over time. If you're going to give $1,000 this year, giving it in January rather than December means the charity has eleven more months to use it before the next year's inflation eats into it. For a large gift, that difference can be significant. Luna: That's a practical takeaway. I also think about the tax side—if you bunch donations into a single year, you can itemize and get a bigger deduction. That's the 'bunching' strategy people talk about. Lucas: Yes, especially after the standard deduction was raised in 2018. Bunching two or three years of giving into one year, often through a DAF, lets you itemize that year and take the standard deduction the others. It's tax-efficient and helps with inflation because the money is deployed sooner. Luna: For listeners who might not have appreciated stock or a DAF, are there simpler ways? Lucas: Sure. One is to look for charities that have strong track records of efficiency—low overhead, high program spending. Your dollar goes further. Another is to support organizations that directly provide goods rather than cash, like food banks that buy in bulk or have negotiated prices. Their purchasing power is higher than an individual's. Luna: So it's like being a smart shopper for your philanthropy. Lucas: Exactly. And one more thing: consider giving to endowments. A donation to a university's endowment or a community foundation's permanent fund is invested, and only the earnings are spent. That principal stays intact and grows with the market, so your gift can provide inflation-protected income forever. Luna: That's a legacy approach. Your hundred dollars today becomes a stream of impact for decades. Lucas: Right. And it's worth noting that the stock market has been strong—the S&P 500 is at 7,544 as of this week. So if you're sitting on appreciated assets, now is a great time to donate them rather than cash. Luna: You know, this episode feels different from our usual 'inflation is eating X' format. It's not about your own wallet; it's about how your generosity can still make a dent. Lucas: And that's exactly why we do these shows. If our conversations help you think about a decision differently, that's the goal. We deliberately don't run ads on the podcast—no sponsors, no breaks. It's just the two of us trying to make sense of this stuff. Luna: Yeah, and if listeners find value in that, they can support the show at buy me a coffee dot com slash fexingo. It's a simple way to keep this ad-free and independent. Lucas: So back to giving. I think the key insight is this: don't just set it and forget it. Revisit your giving each year, adjust for inflation, and consider using tools like DAFs or appreciated stock. Your intention to help shouldn't be silently eroded. Luna: And for nonprofits listening, maybe it's worth communicating to your donors: 'Here's what your dollar bought in 2021, and here's what it buys now.' Transparency helps everyone. Lucas: That's a great point. A little education can go a long way. So to wrap up: inflation is quiet, but your response doesn't have to be. Be intentional, be strategic, and your generosity will still pack a punch. Luna: Thanks, Lucas. I know I'm going to rethink my end-of-year giving plan. Lucas: Same here. Until next time.