Nash loved the idea of DAFs—but was less impressed with the bothersome process of setting them up and making donations. Nash, a long-time Silicon Valley executive and angel investor who went on to run wealth management platform Wealthfront from 2013 to 2016, wondered why there wasn’t an app to streamline and automate charitable giving via donor-advised funds, similar to other fintech platforms that helped users budget, save, invest, and so on.

Daffy, which launched in 2021, is Nash’s solution to the problem. The app allows users to make contributions to a DAF, a tax-advantaged account for charitable giving. The contributions can be invested in a number of pre-established portfolios, ranging from a “standard growth” fund that is split 75-35 between stocks and bonds, to more conservative or aggressive, depending on the donor’s risk tolerance. When they decide to donate the contributions to a specific charity, Daffy does the work. Donors will also be able to find all of the tax paperwork they need in one place. The app also allows users to leave reviews for their preferred charities and automate contributions.

“It is really striking to me how important giving is. We teach our children to give. It’s not just a financial task. It’s something that’s moral, it’s ethical, it’s part of the way we want to live,” says Nash. “And it’s a very powerful thing, to have an app in your pocket where you can, just with a few taps, send money to almost any legal charity in the United States.”

What Nash found attractive about DAFs is becoming increasingly appealing to others who want to make the most out of their charitable contributions. If you’re interested in establishing your own, here’s what to know.

What is a donor-advised fund?

It can be helpful to think of DAFs as similar to a 401(k), health savings account, or 529 account, says Amy Pirozzolo, head of donor engagement at Fidelity Charitable. Individuals or families make lump sum or automated recurring contributions to the DAF, which can then be invested. As the contributions and gains will eventually go to charity, the investments grow tax-free.

“This is a dedicated account for your charitable giving, just like a retirement account,” says Pirozzolo.

Once money is contributed to a DAF, it cannot be taken back; it’s effectively a charitable contribution. But a DAF gives you the flexibility to plan out—and maximize—your donations, and you are also generally eligible to take an immediate tax deduction. But you do not need to select a charity to give the money to right away; similar to other types of financial accounts, a DAF is simply a container for your eventual charitable grants.

While most people don’t plan their giving around a tax break, it doesn’t hurt that contributing to a DAF allows you to do so in years that benefit you most, says Pirozzolo. For example, if you are a small business owner, sales rep working on commission, freelancer, or some other type of worker with variable income and bonuses, you may have a down year but still want to give as much as you usually do. Having funds in a DAF—especially if they have been invested and growing—can help that.

Or look at it another way: Because giving is an integral part of many peoples’ identities, having the contributions already set aside can help you give each year, even if the market has been on the decline or your pay falls.

“This is a great year [for the stock market], we’re going to see a lot of contributions come into these accounts,” says Pirozzolo. “But even in bad years, we see grants go out of these accounts, even when markets are down. People have already irrevocably given it away and taken the tax deduction. So it sustains the sector even then.”

Another benefit: You can donate appreciated assets directly to a DAF—stocks, private stock, crypto, etc.—that many charities can’t accept outright. Instead of selling the assets, paying the capital gains, and donating the remaining cash to the organization, you avoid capital gains altogether.

“You’re saving on taxes and donating more to charity,” says Pirozzolo. “I think of the DAF as a way to multiply your impact. It simplifies all of your charitable giving.”

When you’re ready, you can make then grant the contributions to an eligible IRS-qualified public charity—you become the donor advising the fund how you want the money donated, thus the name.

Pirozzolo points to disasters like the recent hurricanes that ravaged Florida, North Carolina, and other parts of the U.S. South. Many people were moved to donate to aid organizations, and were able to do so from the money they already stashed in their DAF.

Daffy’s Nash says the ability to invest the contributions is one of the main perks of a donor-advised fund. This can overcome concerns about giving up future gains, which explains why many people otherwise wait until they are nearing or in retirement to give seriously.

“The donor advised fund takes that objection away, right? Because the money is still invested,” he says. “For many people, the benefit is they like this idea that their charitable dollars grow.”

DAFs have been around for almost a century, but have experienced “explosive” growth only over the past few years, says Pirozzolo. Donors granted $54.8 billion from DAFs to charitable organizations in 2023—up from $28.5 billion in 2019. There are around 1,000 sponsoring organizations, including big names like Vanguard Charitable and Fidelity Charitable, as well as smaller player like community foundations.

Some people also have access to a DAF as a workplace benefit. Daffy, for example, partners with companies including OpenAI and Acorns to provide employees with charitable giving accounts. Employers can match the contributions or grant charitable gifts to each employee.

Account minimums and fees vary depending on each sponsoring organization. In addition to the fee paid for the account, there may be a management fee for any investments made, something to watch out for and consider.