While it can seem easy these days to lump “younger clients” into one big basket, the truth is that the up-and-coming generations fall into three distinct groups, each with its own preferences and passions.
This may be obvious to you as you have provided wealth management advice to clients from different generations, but you might recognize how those differences affect your clients’ charitable goals. Or how important that knowledge is to your client relationships.
For example, one group puts more energy into volunteering than cash donations, while another is more receptive to impulsive giving opportunities. One generation is likely to make gifts through email campaigns or even by writing checks, while another is quicker to embrace crypto and digital-giving options.
Granted, there are some things that these generations have in common when it comes to giving. They want to see the direct impact of their donations and expect transparency from the charities they support. They also are more likely to support causes aligned with their values and interests, including climate change, social justice, and mental health.
Perhaps more important, all these groups believe that giving is an important part of their financial lives and should be a component of their overall wealth management strategy. Understanding younger clients’ giving priorities can help you better inform their financial decisions and strengthen your relationships with them.
With that in mind, let’s look at the younger generations’ giving habits and preferences. (Data for generations drawn from Generations.com.)
Gen X (1965–1980)
Gen X is the smallest of the three Next Gen groups, comprising only 19.83% of the total U.S. population. This cohort grew up during the economic boom of the ’80s and ’90s, but they also experienced market crashes, corporate scandals, and major recessions while they were establishing their careers. As a result, they’re likely to trust institutions less, which might account for the fact that, as a generation, they are less likely to donate money and more likely to make their contributions by volunteering.
Gen X giving trends:
- Approximately 39.5 million donors in the U.S.
- 59% give to charitable organizations
- The average annual gift is $732
- On average, each person supports four charities
Gen Xers are most likely to donate to local social service organizations, religious organizations, places of worship, children’s charities, and animal rescues. Having grown up as the computer revolution was taking hold, they’re comfortable using technology but still tend to prefer “older” tech such as email and established social media outlets.
Though Gen X is a small generation, it comes with wealth and the potential or greater wealth as one of the generations set to inherent Baby Boomer money in the upcoming Great Wealth Transfer. Gen X is also approaching their prime giving years, so while they tend to prefer active volunteering, there’s opportunity for interest in charitable vehicles such as donor-advised funds (DAFs), which offer them greater flexibility in terms of which organizations they contribute to.
Millennials are the largest generation, comprising 21.75% of the total U.S. population. They also might be the most beleaguered generation, having grown up in the wake of the 9/11 terrorist attacks and subsequent wars in Iraq and Afghanistan. They came of age and started entering the workforce during the height of the Great Recession and, as such, are likely to have struggled early in their professional careers, encumbered by low starting salaries and high college debt.
Millennials are the second-most racially and ethnically diverse adult generation in the nation’s history. As a result of this diverse makeup and their own experiences with hardship, millennials tend to have a greater awareness of other communities and are most involved in advocacy and public society benefit causes.
Generation giving trends for millennials in the US:
- An average of 32.8 million donors
- 60% give to charitable organizations
- Give an average annual gift of $481
- Support an average of three charities per person
The charities that millennials are most likely to support include children’s charities, public society benefit charities, public health charities, religious organizations, places of worship, and charities dedicated to human rights and/or international development.
In general, they’re more likely to believe in success obtained collectively as a group, to value transparency in organizations, and to want to see the direct impact of their giving. Having grown up with the internet, millennials are comfortable using technology, especially social media and online resources.
Though they currently have fewer assets to give than other generations, 60% of millennials donate to charitable organizations, and according to a Bank of New York Mellon report, up to 97% of millennials consider charitable giving part of their overall wealth strategy. That’s important because, as the largest population, millennials likely will inherit the bulk of baby boomer wealth as part of the Great Wealth Transfer.
Even with currently limited assets, millennials have played a key role in the 23.5% increase in giving to public society benefit organizations, which Giving USA calculated as a total of $55.85 billion. These organizations, which include national DAFs, the United Way, and civil rights organizations, are steadily gaining in total share of all donations.
Millennials are also supportive of environmental, social, and governance (ESG) considerations, with Morgan Stanley reporting that 99% of millennials are interested in sustainable investing. Millennials are more likely to want to work with advisors who are able to match their ESG impact investments with charitable giving.
As a result of the COVID-19 pandemic, more millennials are writing wills and considering estate planning, which may include charitable trusts and planned gift annuities. With this generation’s increasingly forward-thinking, DAFs can also serve as great “sticky assets” that can keep them and their children engaged and invested with giving.
Having grown up during periods of economic instability, millennials are more likely to be receptive to “checkbook giving” — that is, doing more ad hoc donations over strategic, regular giving. DAFs can serve as a great option for millennials who want to give but don’t feel comfortable with committing to regular donations. This may be reflected by a study from Bank of America, which found that donors aged 38 or younger were two and half times as likely as older generations to donate to DAFs and other giving vehicles.
Gen Z (1996–2012)
Gen Z is emerging as the most racially and ethnically diverse adult generation in the nation’s history. They are coming of age in a post-pandemic environment and, even more so than millennials, are rapidly becoming one of the most socially conscious generations.
There are no numbers for Gen Z generational giving trends yet, as they are too young for their charitable giving to be on a measurable scale. However, there are a few basic trends to consider as they continue to mature:
- Often referred to as the “always online” generation, Gen Z’s primary means of communication is through mobile devices and social media.
- As they are extremely comfortable with digital technology, they are quick to jump on board with new fundraising trends and tools, such as crypto.
- Similar to millennials, Gen Z is highly interested in environmental concerns, prefers transparency with organizations they’re involved with, and they are highly dedicated to social benefit causes.
- As they have the least amount of capital to invest, Gen Z donors may make use of Flex Giving accounts, which can provide the benefits of DAFs without the high minimum investment.
Help parents engage Next Gen kids in giving
If you’re working with parents who are looking for ways to engage their children in giving, here are seven tips you can offer them to get things rolling.
- Discuss the importance of giving. Parents can’t expect kids to value giving if they don’t model that behavior. Urge them to talk about it around the dinner table, in random conversations and so on.
- Donation of old toys and clothes. Kids can launch their philanthropy careers by donating their possessions to those in need.
- Establish a DAF to build a tradition and legacy of giving together.
- Grant allowance from existing DAF account. Parents can give their children a say in the way specific amounts are donated.
- Provide guidance on DAFs. Parents should explain the benefits of DAFs and help kids imagine how they would use them.
- Successor Grant Advisor. Parents can name children as successor grant advisors on existing DAFs or those established in the future.
- Volunteer time and energy. Kids can be encouraged to volunteer for causes they believe in.
- Embrace family causes. If there are particular causes that resonate with the family, parents should share them with the younger generation.
Start the conversation
With the rising generations making charitable activities a part of their financial lives, it’s important that you demonstrate how you can help them reach their charitable goals.
While you’ll want to tailor your conversation to the specific interests of the generation you’re speaking to, there are some general approaches that can help you tap into this opportunity.
- First of all, don’t hesitate to bring up the topic of charitable giving. A number of studies have shown that donors want to discuss their philanthropic ambitions with financial advisors, and some research has suggested that clients are disappointed if advisors don’t bring up the topic.
- Second, start the conversation by asking what matters to the donors – what causes they are passionate about, what nonprofits they support and why. Ask open-ended questions and seek not simply to get answers but to have a conversation that will give you insights into the client’s values and priorities.
- Discuss different options for giving. While the vast majority of people’s wealth is held in noncash assets, most people think first of giving cash, and that often is the least efficient and least tax-beneficial way of giving. Introduce the opportunities presented by options such as DAFs and donating complex assets directly to charity.
- Help clients see charitable giving as a lifelong, legacy-building component of holistic wealth management, and position yourself as a resource for making their philanthropic ambitions a reality.
Want to learn more about how to talk to clients about charitable giving? Talk to our experts at Ren.