Next Gen Generosity – An ease with technology and a focus on effectiveness are helping a new wave of donors roll up their sleeves and change philanthropy

For all the parents who practiced philanthropy with their kids, a survey released this year provides some good news: The next generation of donors, who stand to inherit trillions of dollars and create trillions more in their lifetimes, has grown up with strong philanthropic values. (The 2013 survey, “The Next Gen Donors,” is a collaboration of 21/64, an organization that studies generational giving, and the Dorothy A. Johnson Center for Philanthropy.) 

MY WAY

To pass on important values to a child may be a parent’s dream. Yet as U.S. Trust wealth strategies advisor Christine L. Courtnage explains, the “Next Gen” donors are doing more than simply following in Mom and Dad’s footsteps. “Each generation approaches charitable giving in its own way,” she says. “That’s because each generation has grown up under different economic and social circumstances and developed different perspectives on how to make an impact through philanthropy.” What’s more, thanks to what Courtnage calls “a love of digital technology,” the Next Gen cohort could be transforming philanthropy itself.

A GENERATION ONLINE

This new wave of philanthropists — Generation X born 1964–1980 and Generation Y/Millennials born 1981–2000 — could be said to have grown up online. So it is probably no surprise that digital technology is influencing when, where, how and why they donate. “This research shows that members of the Next Gen cohort, having used the Internet routinely growing up, are now harnessing it to conduct charitable activities online,” says Claire Costello, philanthropic practice executive for U.S. Trust.

Among survey respondents, more than 90% have visited a charitable group’s website, and almost three-quarters have used Internet search engines to help them look. About 40% have visited sites that offer reviews of charities and almost one-third (32%), with the younger group, the Millennials, predominating, have used social media sites to find information.

“They can visit a philanthropic organization’s website and find a mission statement or a financial report, the names of major contributors and board members. With a little extra effort they can verify that information and even read third-party reviews of a charitable organization,” Costello says, noting that while the information is available to donors of any age, the Next Gen is particularly adept at using the Internet to locate it. (See: “Next Gen Donors: Top Five Steps.”)

WHAT THEY SAY

Next Gen-ers use a variety of sources for philanthropic education and networking. The survey reports that the top three sources are: next generation peer groups (30.6%), community foundations (28.2%) and the Council on Foundations (27.1%). Even so, “as is true for older generations, peer groups are the Next Gen’s top pick as a source of education and discussion on philanthropy,” Costello notes. “For the new donors, especially the Millennials, this is in part a result of the broad use of social media by the group.”

CLICK, CHECK, CASH?

You might think that tech-savvy Next Gen folk would favor giving via the Internet, and to a degree that is the case. More than three-quarters (78%) of survey respondents said they had donated through an organization’s website in the prior year. At the same time, a good number appear to employ traditional giving vehicles as well.

NEXT GEN MEMBERS ARE NOTHING IF NOT STRATEGIC DONORS.

More than four out of five (85%) report that they currently donate by check, and more than half (58%) give cash. Yet, says David E. Ratcliffe, of U.S. Trust’s National Philanthropic Solutions group, “there are stark contrasts elsewhere. Three-quarters of the families use foundations, for instance, whereas just 6% of Next Gen respondents do.”

Granted, this may be less a generational issue per se than a result of available assets: Families might have sufficient assets to fund a foundation whereas Next Gen-ers might not. Still, stronger generational differences are evident in the younger group’s affinity for giving through donor-advised funds.

FOCUS ON DONOR-ADVISED FUNDS

Donor-advised funds (DAFs) are flexible charitable-giving vehicles that are a common alternative to direct giving or creating a foundation. A third (31%) of the Next Gen group use DAFs, while just over one in 10 families (12%) favor them. This suggests an orientation toward less structure and more flexibility in Next Gen giving, Ratcliffe says. “There’s a propensity among this generation toward immediate support for a cause or a resolution to an issue. They seem to be less interested than older generations in creating a great deal of infrastructure around their managed grantmaking.”

HANDS-ON EXPERIENCE PREFERRED

The survey reveals that although young donors value what they have learned about philanthropy from parents and grandparents, they give more weight to learning from hands-on experience, from watching their elders in philanthropic activities, and from observing the need for philanthropy.

Next Gen donors may also share an interest in some of the same philanthropic causes as their parents. And when it comes to donations of time and money, they appear to focus on results, just as their parents do. “They want to have a real impact, they want to see that impact, and they want to measure that impact,” Ratcliffe says.

“Like the older generations, who are interested in making sure a new school building they helped pay for is actually built, for example, Next Gen-ers will track whether a social service they funded is being run effectively. To do this, they are more likely to establish a hands-on working relationship with an organization,” Ratcliffe adds.

SMALL WORLD

Some Next Gen individuals prefer giving to smaller organizations because they believe their donation will have a larger impact. What’s more, “by donating to smaller groups, they can often measure that impact, and that’s important to them,” Ratcliffe says.

THREE OF AMERICA’S TOP FIVE DONORS IN 2012 WERE UNDER 40.

This focus on so-called evidence-based giving is causing some young donors to move away from the traditional approaches their parents often favor, such as annual gifts to charity, and toward what the survey calls new strategies for giving. These can be relationships that are more focused and collaborative. “The bottom line is that the Next Gen group wants to know that it is having a philanthropic impact,” Ratcliffe notes.

EVIDENCE-BASED GIVING

“THE NEXT GEN WANT TO HAVE A REAL IMPACT, THEY WANT TO SEE THAT IMPACT, AND THEY WANT TO MEASURE THAT IMPACT.” – DAVID RATCLIFFE

The philanthropic world overall has grown more evidence-focused. Among thousands of charitable organizations, many now routinely report online how they source their funds and how they spend them. Other sites rate charitable organizations for transparency and effectiveness. Still others give small charities the opportunity to “crowd source” — receive small donations from many donors — and provide updates on their effectiveness.

ONLINE AND UPWARD

The importance of both the Internet and the Next Gen to philanthropy is evident in the numbers. Online giving rose by 10% in 2012 while overall giving rose by just 1.7% (as reported in the Charitable Giving Report, a Blackbaud publication). And three of America’s top five donors in 2012 were under 40 — in other words, members of the Next Gen cohort (as reported in The Chronicle of Philanthropy, a widely used source for philanthropy news).

Will this new wave of donors become more deeply involved in philanthropy? U.S. Trust’s Courtnage thinks so — “as long as they sustain their own personal philanthropic visions,” she says. The results of the 21/64 survey suggest they are doing just that. Indeed, with their philanthropic values and their online expertise, these young donors should become — perhaps already are — able stewards of America’s most cherished tradition. If you would like to learn more about the different aspects of charitable giving, including the use of donor-advised funds, a fast-growing giving vehicle, please contact your U.S. Trust advisor.