One in six UK charities fear they could be forced to close next year because of a drop in donations and funding.
Nearly half of organisations have used reserve funds to cover shortfalls in income, while a quarter have cut staff to stay afloat, according to figures released by the Charities Aid Foundation (CAF).
It also found that public donations to charities are down 20%.
Wozzy Brewster launched the Midi Music Company in Deptford, London, 18 years ago to provide a space where children could be inspired and get into music.
This year, the charity has slashed two staff posts and cut back on its work with poorer families and young people in nearby Lewisham.
"Small charities like ours, in the middle of areas where gang warfare is going on, are in need of far greater donations," Ms Brewster told Sky News.
"At the moment, we are still short of £10,000 for this financial year. If we don't achieve that it will just add to our accumulating deficit."
The figures were released as Lynne Featherstone, the Government's aid minister, called for charities to be more self-sufficient and not rely on Government handouts.
However, Rhodri Davies, policy manager at the CAF, said: "The majority of charities in the UK get no money from Government, never have done and will probably never look to.
"We're realistic; money from Government has been cut back, there's public spending cuts across the board and charities have to bear their share of that.
"But what we're saying is that where Government and local authorities do make cuts to public spending, they shouldn't just disproportionately load those onto charities."
Three years ago, Toby Ord launched a website called Giving What We Can, with the aim of making it easier for people to donate to charities through their salary.
So far, 250 people have pledged at least 10% of their pay to good causes.
"If people think about doing this early enough, they could donate more than £100,000 in their lifetime," Mr Ord said.
Charities minister Nick Hurd suggested that everyone should attempt to give 1% of their annual wage to charity to help stop the decline in donations.
The CAF has also launched its Back Britain's Charities campaign, which calls on the Government, businesses and individuals to get behind the nation's charitable organisations.
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