Save to give: How millennials will shape philanthropy
Nov 21, 2017
Each generation approaches philanthropy differently. With millennials in particular receiving a lot of attention recently, as ascending generations often do, we wanted to use the final blog in this series to see what we can expect in the way of charitable giving from this group.
Research suggests that millennials are results-oriented. According to The 2015 Millennial Impact Report, millennials are more interested than their predecessors in seeing tangible evidence of the impact of their engagement. Millennials have not yet reached their maximum earning potential, and so their average giving lags behind that of other generations, but indicators like high volunteerism underscore millennials’ interest in making the world a better place.
The usage among millennials of donor-advised funds (DAFs) is growing at Vanguard Charitable. Our millennial donors give at a higher clip and are more likely to follow up with nonprofits to monitor the impact of their giving. These data points suggest that, as millennials become more financially secure, they will have a major impact on the philanthropic landscape of the future.
Our millennial donors give at a higher clip and are more likely to follow up with nonprofits to monitor the impact of their giving, suggesting that they will have a major impact on the future philanthropic landscape.
For this reason, the save-to-give scenario this week considers a hypothetical millennial, a member of the generation that is most advantageously positioned to benefit from the long-term power of a DAF. In the two previous blogs, we looked at data from the past 20 years. This blog will forecast into the future, using this past data as a guide.
These are projected figures that assume returns similar to those we have seen in the past 20 years. The projections should not be taken as a firm prediction of future growth, but they do give a broader sense of the type of impact millennials can have.
Imagine a 30-year-old named Abby. Let’s say she is a sharp businesswoman who has been involved with a series of successful start-ups. She is interested in a long-term giving strategy that will set her up to become a serious player in the philanthropic field later in life. She contributes $25,000 worth of IPO stock to open her DAF account, and then commits to an additional contribution of $10,000 each year afterward. She intends to grant 5% of her funds each year, leaving the majority of her account to grow tax-free over her desired 30-year timeframe.
Abby decides that an equity-heavy portfolio (90% stocks and 10% bonds) is right for her. This allocation will support her ambitious growth goals in the current low-return environment, and her extended time horizon can help her ride out any volatility that accompanies her stock-centric approach. Let’s see how she does.1
With her longer timeframe, Abby’s return on investment is even more impressive than in the previous examples we’ve explored. Her charitable impact is a whopping 162% greater than if she had made her contributions directly to charity.3 Note that this model assumes her rate-of-giving and granting will stay constant over the course of 30 years. In reality, Abby’s DAF account would give her the flexibility to adjust these aspects of her strategy to meet new giving goals.
While Abby might not be representative of all millennials, who may not yet see themselves as philanthropists, but Vanguard Charitable has more millennial donors than you might expect. With hundreds of new millennial accounts in the past few years, their share of the pie is growing. More broadly, millennials have recently surpassed Baby Boomers as the most populous generation. As they continue to come into their own, they will have the power to shape society and the philanthropic landscape.
The power of saving to give
Taken together, we hope the three scenarios in this series have highlighted the value of adopting a save-to-give approach to charitable giving. They show that our donors don’t need to choose between an immediate impact and a long-term outlook. They can have both. The variety of approaches taken by these hypothetical donors demonstrates how long-term plans can allow you to be creative and do more with your giving. As we move into our next 20 years, saving to give will help our donors continue to amplify their imprint on the world of philanthropy.
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