Young bucks: How the wealthy donate now

NEW YORK Thu Nov 15, 2012 10:02am EST

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NEW YORK (Reuters) - When it comes to donating time and money, wealthy Americans are thinking globally and using technology to connect with charitable organizations in some of the most remote corners of the globe.

For an update on the state of giving, I talked to Una Osili, director of research and a professor of economics and philanthropic studies at the Center on Philanthropy at Indiana University. Here she discusses the latest findings from her annual survey on high-net-worth philanthropy, conducted in partnership with Bank of America.

Q. How does charitable giving now compare with pre-recession levels? A. Giving USA, which tracks the nation's charitable contributions, saw its steepest decline in giving during the recession years - a cumulative drop of about 13 percent, adjusted for inflation. (The last recession began in December 2007 and ended in June 2009, according to the National Bureau of Economic Research.)

But since the recession ended, we've seen an uptick in giving. The most recent numbers show average annual growth in the 1 percent to 2 percent range during the post-recession period, with giving reaching about $298 billion in 2011. That's good news, but if we continue to grow at this slow rate, it will take more than a decade to return to the pre-recession highs when peak giving was well over $300 billion.

Q. Who is gaining donors? Who is losing them? A. Giving to religion declined 4.7 percent in 2011, adjusted for inflation. This may be explained by recent reports of decline in membership and religious attendance among some large religious denominations.

Some educational institutions have done relatively well, though. Education ranks as the No. 1 priority among 61 percent of donors, according to our research. Many donors already have ties with their alma maters and see education as a way to solve problems in society.

Q. What about more affluent donors? Are they giving more or less? A. Economic and financial security are significant drivers of giving. Certainly the recession had a big impact on the ability of wealthy donors to give, and the volatile stock market and low interest rates don't help. (The survey focused on households with more than $200,000 in annual income and more than $1 million in assets, excluding their homes.)

We asked high-net-worth donors for the first time: What are your plans for next three to five years? More than 75 percent plan to continue at current levels or increase their giving; 24 percent of them plan to give more.

That's a relatively optimistic view. We find that these donors are deeply committed and highly engaged with the charities they support.

Q. What's new about the way people give now? A. The globalization of giving means donors can reach causes in their own local communities but also in Ghana, Mexico or the Philippines. Even during the recession, international giving was emerging as a bright spot, growing at double-digit rates.

When we started tracking data in 2000, about 2 percent of U.S. households were giving to international causes. Today that's closer to 8 percent.

Q. How has technology changed the way we give? A. Technology makes it possible to learn about and get involved with nonprofits anywhere in the world. You can tweet, Facebook and connect with an orphanage in Guatemala you might not have heard about 10 years ago.

In the aftermath of the 2010 earthquake in Haiti, donors were giving to large nonprofits like Partners in Help, but they also found their way to smaller nonprofits initiated by Haitian-Americans as well as churches and other organizations on the ground.

Q. What does the uncertain state of tax laws mean for charities? A. Taxes are not the sole driver of giving, but tax policy certainly influences it. What's being considered now is a cap on the amount wealthy donors can deduct. In 2010 donors said for the first time that they'd change their giving if charitable deductions were eliminated, according to our study.

Q. What other trends are you seeing on the giving front? A. Women are increasingly playing a highly visible role, particularly boomer women. The American Red Cross, for example, has a Tiffany Circle of high-net-worth women who are making a difference.

In 90 percent of affluent households, women are the sole decision maker or partner in giving decisions.

Q. Tell me about tomorrow's donors. A. Young donors have different motivations for giving and the type of causes they support. They don't want to just write checks. They want to volunteer. They often take a hands-on approach to philanthropy and addressing issues like homelessness. They contribute their time and talents to make a difference.

Some new donors are what we call voluntrepreneurs - they are young people who want to make a difference around the world. They are using philanthropy to solve the world's problems in education, health and elsewhere.

Q. So where do social entrepreneurs - who mix business principles and social values to solve the world's problems - fall into this mix? A. The 21st century requires more creative solutions. Social entrepreneurship straddles the world of business and philanthropy. It's different from the older model of philanthropy because it uses innovative approaches and entrepreneurial principles to solve social problems on a large scale.

Just look at microfinance organizations like Grameen Bank and kiva.org, which give small loans to entrepreneurs to start businesses. We have some very pressing global challenges, and how do we solve them? It may involve using new tools and ideas, including some from the business world. The lines may blur.

(The YOUNG BUCKS column appears monthly and at additional times as warranted. Lauren Young tweets at www.twitter.com/laurenyoung. Read more of her work at blogs.reuters.com/lauren-young; Editing by Linda Stern and Douglas Royalty)

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