Crowdfunding & Funerals: What you need to know

Published on Thu Oct 17 2019 in Money

 Funerals in New Zealand can be expensive. The average cost is around $9,000, but once you’ve added up everything from the flowers to the headstone, the final bill could be a lot higher. With only 5% of Kiwis planning for their own funeral, the financial burden largely falls on family to pay for their loved one’s service.

Paying for a funeral can be tough, and with money often needed on short notice it can be even more difficult for grieving families to find the funds needed. As a result, some grieving Kiwis are turning to online crowdfunding sites to help lay their loved ones to rest.

What is crowdfunding?

Online crowdfunding is simple: many people give a small amount of money to support a project or cause. Often this is done through websites designed to help people ask for and accept donations. 

You’re likely already familiar with the idea of crowdfunding. The popular party game Cards Against Humanity and the Oculus Rift virtual reality headset were both originally launched through online crowdfunding campaigns. In recent years, crowdfunding has even been used to produce TV shows and movies.

While these sites are new, the idea behind them is not. In 1885 a campaign was started to erect the Statue of Liberty in New York City after the governor of New York state refused to set aside government funds for the project. People across America sent donations, sometimes as small as five cents. Those who contributed at least a dollar received a 6-inch statuette of Lady Liberty as a thank you!

The arrival of the internet has allowed crowdfunding projects to reach more people than ever before. Sites such as Kickstarter and GoFundMe make it quick and easy for anyone to set up a campaign, share it on social media, and start collecting funds. News stories and celebrity support can make a page go viral, leading to thousands or even millions of dollars in total donations.

Crowdfunding a final farewell

As crowdfunding’s popularity grows, more people are using these online platforms to pay for private events, including funerals. Research has found that the number of funeral campaigns grew 5,900% from 2014 to early 2017.¹ A recent search of Givealittle, a crowdfunding site specifically for New Zealanders, found over 700 fundraisers created to help cover funeral expenses.

Often, campaigns are also created to help memorialise the deceased or assist their family in other ways. They may raise money for a favourite charity, pay for medical expenses incurred before their loved one’s death, or to help care for young children who are left behind.

The downside of crowdfunding

Paying for a funeral through crowdfunding may sound easy, but there are downsides to relying on these sites. One big problem is that most campaigns fail. A small 2017 study found that 90% of crowdfunding pages on the site GoFundMe never reach their fundraising goal.²

Even if your family is able to collect donations, the funds may not be available in time to pay for funeral arrangements. Some sites only release money after a fundraising goal is met, which could take weeks or even months to reach. Also, sites might only release funds once per month, a delay that could potentially put your family out-of-pocket for weeks.

Setting up a crowdfunding page is free, but there are often other charges for using these sites. Many charge service fees—such as the 5% fee taken by Givealittle—to cover transaction fees and other business expenses. This is typically subtracted at the end of a campaign, eating into the final donation your family would receive.

Other sites are not open to Kiwi users. GoFundMe does not currently support campaigns in New Zealand and will not transfer funds to NZ bank accounts.

Sadly, crowdfunding can also attract fraud. There is very little oversight on most platforms, meaning anyone can set up a donation page. This unfortunately means pages can be created by strangers or even acquaintances who have no intention of giving the money to your family.

Even official pages can put well-meaning family or friends at risk. Crowdfunding is designed to be public, and people are encouraged to share photos, personal stories and updates to get better results. This type of information can be used by thieves to target your family for phishing scams that make use of personal details and photographs in order to gain more sensitive information.

1. Frazer Consulting, The state of crowdfunded funerals in 2017. Feb 2017
2. Social Science & Medicine, Producing a worthy illness: Personal crowdfunding amidst financial crisis. August 2017

 

About Author: Momentum Life is a leading provider of Life insurance and Funeral insurance in New Zealand.

The content provided in this article is for information purposes only. The information is of a general nature and does not constitute financial advice or other professional advice. To the extent that any of the content constitutes financial advice, it is limited to Momentum Life products only and does not consider your specific financial needs or goals. You should consider whether the information is appropriate for you and seek independent professional advice, if required.

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