Wealthy millennials and Gen Z are redefining philanthropy

Wealthy millennials and Gen Z are redefining the world of charitable giving, seeing themselves more as activists than donors, according to a new study.

According to a new study from Bank of America Private Bank, wealthy donors under the age of 43 are more likely to volunteer, fundraise and mentor charities rather than simply donating money. The survey of more than 1,000 respondents with investable assets exceeding $3 million also found that young philanthropists want more public attention for their giving than Gen 3 and Baby Boomers.

Changes in how the next generation gives, as well as the causes they support, could reshape the philanthropic landscape. Instead of just writing checks to causes they care about, the next generation of donors wants to be deeply involved in trying to solve the biggest social and environmental problems.

“They see themselves as agents of holistic social change,” said Diane Chips Bailey, managing director and executive director of national philanthropic strategy for Philanthropic Solutions at Bank of America Private Bank. “I think they have a better sense of agency in this world. They are really looking to move their capital in a more comprehensive and powerful way to achieve their social impact goals.”

Both younger and older billionaires are extremely charitable. According to the survey, 91% of respondents donated to charities last year. More than two-thirds of older and younger respondents said they were motivated by “making a lasting impact.”

However, the reasons for administering them and their methods vary greatly according to age. Donors under 43 are slightly more likely to volunteer and are twice as likely to help collect charitable donations from friends or colleagues rather than donating directly. They are four times more likely to act as mentors. And they are more interested in serving on nonprofit boards than limiting their contributions to capital.

Older donors leave a sense of responsibility. People over 44 were twice as likely to donate out of “obligation” 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 cycle and resources. Rich young people are still making fortunes and inheriting their wealth, so they are more likely to donate their time and help raise funds. Still, Bailey says the focus on peer networks and activism will likely endure even as they grow older and wealthier.

“You can think of philanthropy as the five Ts – time, talent, treasure, testimony and bond,” he said. “The older generation focused on dhan (finance). The younger generation is leaning towards the other four.”

Rich young people also support various causes. They are twice as 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, arts organizations, and military charities.

“When you think about what (younger generations) have been through in the last few years, up until 2020, when they were exposed to all of this, they are inclined to react,” Bailey said. “And it survives. Many people move their donations with securities, but they really go deep. It’s not a moment, it’s a movement.”

The impact of the generational shift in giving will be profound for wealth consultants and nonprofits, consultants say. Since many younger donors inherited their wealth, they are more likely to use vehicles created by their families. They were four times more likely to use charitable trusts, family foundations and donor-advised funds.

Bailey said the next generation wants to talk about philanthropy as part of the initial discussion with a wealth advisor — even before talking about their investment plans.

“They have a desire to learn more, to learn more about philanthropy,” Bailey said. “They’ve already prepared these complex (donation) vehicles, so the educational piece is important for both the nonprofit and the consultants.”

With philanthropy increasingly dominated by wealthy donors and the next generation expected to inherit more than $80 billion in the coming decades, nurturing the wealthy young will be critical.

“You need their perspective and you’re going to need their money,” Bailey said.

Advisors to rich young people also need to be generous in their praise. According to the survey, younger donors are three times more likely to measure the success of their philanthropic efforts through public recognition. About half say they can attach their name to their philanthropic efforts, while more than two-thirds of older donors give anonymously.

“Praise them, celebrate them, give them visibility,” he said.

Just don’t call them “philanthropists.” A Foundation Source report found that 80% of young donors want to be seen as “donors,” while 63% prefer the term “advocate” or “change agent.” Only 27% accepted the “philanthropic” label.