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A version of this article first appeared in CNBC's Inside Wealth newsletter with Robert Frank, a weekly guide for the high-net-worth investor and consumer. Sign up to receive future issues, straight to your inbox.
Affluent millennials and Generation Z are redefining the world of charitable giving, seeing themselves as activists rather than donors, a new study reveals.
Wealthy donors under the age of 43 are more likely to volunteer, fundraise and serve as mentors for charitable causes rather than simply donate money, according to a new study by Private Bank of America. The survey of more than 1,000 people with more than $3 million in investable assets also found that younger philanthropists want more public attention for their giving than Generation X and baby boomers.
The shift in the way future generations give, as well as the causes they favor, is likely to reshape the philanthropic landscape. Instead of just writing checks to causes they care about, the next generation of donors wants to get deeply involved in trying to fix the biggest social and environmental problems.
“They see themselves as agents of comprehensive social change,” said Diane Shipps-Bailey, managing director and executive director of national philanthropy strategy for Philanthropic Solutions at Private Bank of America. “I think they have a better sense of agency in this world. They're really looking to move their capital in a more comprehensive and powerful way to achieve their social impact goals.”
Both younger and older millionaires are extremely charitable. According to the study, 91% of participants donated to charitable organizations in the past year. More than two-thirds of both older and younger participants said they were motivated to “make a lasting impact.”
However, their reasons for giving and their methods vary greatly by age. Donors under the age of 43 are more likely to volunteer and are twice as likely to help with charitable fundraising from friends or peers rather than just donate directly. They are four times more likely to serve as mentors. They are more interested in serving on nonprofit boards rather than limiting their equity contributions.
Older donors give out of a sense of responsibility. People over 44 were more likely to donate due to 'commitment' than younger donors. Those under 43 were more likely to cite self-education and the influence of their social circle as drivers of their philanthropy.
Some generational differences may be rooted in life cycles and wealth. Younger wealthy people are still building their fortunes and inheriting fortunes, so they are more likely to donate their time and help with fundraising. However, Bailey said the focus on peer networks and activity is likely to continue even as they get older and wealthier.
“You can think of philanthropy as the five Cs: time, talent, treasure, testimony, and relationships,” she said. “The older generation focuses on hoarding (giving money). Younger generations tend toward the other four generations.”
Rich young people also support different causes. They are more likely to support efforts related to homelessness, social justice, climate change, and the advancement of women and girls. Philanthropists over the age of 44 were more likely to support religious organizations, the arts, and military charities.
“When you think about what (the younger generation) went through in recent years, 2020, where they saw everything laid bare, they tend to respond,” Bailey said. “And it's ongoing. A lot of people hype their giving with headlines, but they've really sunk in. It's not a moment, it's a movement.”
The implications of the generational shift in giving will be profound for wealth advisors and nonprofits, advisors say. Because many young donors have inherited wealth, they are more likely to use donation vehicles created by their families. They were four times more likely to use charitable trusts, family foundations and donor-advised funds.
The next generation wants to talk about philanthropy as part of an initial discussion with a wealth advisor — even before they talk about their investment plan, Bailey said.
“They are hungry to learn more, to learn more about philanthropy,” Bailey said. “They already have these complex (giving) tools ready, so the education part is critical for both nonprofits and advisors.”
With philanthropy increasingly dominated by wealthy donors, and with future generations expected to inherit more than $80 trillion in the coming decades, courting wealthy young people will be crucial.
“You need their perspective and you'll need their money,” Bailey said.
Advisors to young wealthy people also need to be generous with their praise. According to the survey, younger donors are three times more likely to measure the success of their charitable efforts through public recognition. Nearly half say they are more likely to associate their names with their charitable efforts, while more than two-thirds of older donors give anonymously.
“Praise them, celebrate them, give them vision,” she said.
Just don't call them “benefactors.” A report from Foundation Source found that 80% of young donors want to be seen as “donors,” while 63% also like the terms “advocate” or “changemaker.” Only 27% accepted the title of “philanthropist.”
