For nearly a decade, the Bank of America Study of Philanthropy: Charitable Giving by Affluent Households has been conducted in partnership with Indiana University’s Lilly Family School of Philanthropy. It is the most comprehensive, longitudinal study of the giving habits of America’s wealthy families. The study’s 2021 version was recently released and offered insights and lessons for our charitable community.
Let’s begin with a definition. For purposes of this study, “affluent households” are those with a net worth of at least $1 million (excluding the value of their primary home) and/or having an annual household income of at least $200,000.
Perhaps the most heartening news for folks like me who work in the world of philanthropy is that ours is by far the most trusted segment of society. That is, when members of wealthy families are asked which entities they most trust to solve society’s intractable problems, nonprofit organizations are at the top of the list.
America’s charitable sector is trusted 24% more than small businesses, 42% more than churches, 44% more than the president, 56% more than large corporations and 67% more than Congress. About seven out of every eight people in affluent households express some reasonable level of confidence in the nation’s charities and philanthropic organizations. Not surprisingly then, especially considering their wealth, affluent households donated 17.5 times more money to charities than donors in the general population.
What is surprising is the enormous disparity in the rate of giving, even if you exclude consideration of the size of the donation. Of affluent households, 88.1% make a gift to charity every year while only 48.8% of the general population does. In other words, affluent households are 80% more likely to donate to charity in any dollar amount.
Further, the gap in the giving rate between wealthy families and the country as a whole grows even larger if you exclude churches from the statistics. Affluent households are more than twice as likely to give to a nonchurch charity compared to the population as a whole.
Interestingly, younger and older generations of affluent Americans are increasingly approaching giving from a different perspective. Younger people are significantly more likely to say that concern about a specific societal issue is the fundamental motivation behind their giving decisions, regardless of the charity that ultimately receives the gift. Conversely, older Americans are far more likely to say that faith and confidence in a particular organization are why they donate, rather than to confront a single issue facing society.
The study also found that affluent families are becoming far more savvy about the enormous tax advantages of using giving vehicles to facilitate their charitable donations. Since 2017, nearly 50% more of America’s wealthy families have begun using a Donor Advised Fund as a means to simplify and centralize their giving. Similarly, during that same time period, 42% more wealthy families have added a charity as a beneficiary of their estate plans.
One of the more recent trends among affluent households is the use of impact investing to achieve philanthropic goals. Impact investing involves making financial investments in for-profit companies with the intention of generating positive, measurable social and environmental impact alongside a reasonable financial return.
About one out of every seven wealthy families explicitly uses an impact-investing strategy to achieve both its financial and philanthropic goals. Although this still remains a relatively modest portion of affluent households, the trend is clearly pointing up. Since 2017, nearly twice as many wealthy Americans have begun participating in impact investing.
Finally, only 11.9% of affluent households did not give anything to charity last year. The most common explanation, offered by 30.9% of wealthy Americans, is that a family need took priority. Obviously, if a family has a specific financial challenge that constrains its giving, there’s nothing a charity can do about that.
However, consider the next three most common reasons: “No connection to an organization” (21.9%), “Do not want to give to charity” (20.8%), and “Was not asked to give” (19.8%). Each of these reasons why wealthy families didn’t donate is the fault of those of us who work in the charitable sector. No connection? We failed to engage. Do not want to give? We failed to inspire. Never asked? We failed to respectfully ask.
This longitudinal study provides invaluable insights on the giving patterns of affluent families, but ultimately it is incumbent on those of us who work and volunteer for charities to engage, inspire and ask people to give back to the Door County community we all love.