In a year beset with a global pandemic and other crises, the vast majority of wealthy households — 88% — gave to charity in 2020, according to a study from Bank of America and the Indiana University Lilly Family School of Philanthropy.
“There was a high level of commitment to charitable giving that was maintained during these very difficult times,” says Una Osili, associate dean for research and international programs at the Lilly School. “Affluent households remained generous and consistent in their giving.”
The study is based on a survey of 1,626 households with a net worth of $1 million or more, excluding the value of their primary home, or an annual household income of $200,000 or more. The median income of survey participants was $350,000, and the median wealth level was $2 million.
Most affluent donors responded to the pandemic with unrestricted gifts that allowed organizations to spend the money on whatever leaders thought was most important. Roughly three-quarters reported that their contributions to health-related nonprofits and higher education were unrestricted, and more than 83% said they gave unrestricted donations to arts and culture groups.
Philanthropy advisers have been working for years to get rich donors to see the logic of giving more unrestricted gifts, says Dianne Chipps Bailey, who as managing director of Bank of America’s Philanthropic Solutions division advises both wealthy donors and nonprofits. She thinks the crises of 2020 helped donors better grasp the importance of giving unrestricted donations and releasing restrictions on previous gifts.
“The pandemic exposed the uncertainty in our world in a very dramatic way and showed that giving unrestricted gifts can really empower nonprofit leaders to direct that money to what is most needed,” Bailey says.
Nearly 75% of affluent donors said they did not expect the pandemic to change their giving behavior. A little more than 5% said their future giving would be “less restrictive,” and almost 20% reported it would be more directed to specific issues.
In 2020, 57% of affluent households gave to nonprofits that provide for basic needs, and nearly 47% gave to religious organizations. Roughly one-third reported giving to health groups, and 36% gave to education.
One issue that gained significance among rich households in 2020 was social and racial justice. Nearly 9% of wealthy households said social and racial justice is important to them; in 2017, that figure was 5.8%. Roughly 11% of respondents said they gave to Black causes or organizations in 2020 compared with 6.5% in 2017.
Nearly 25% of rich households reported giving to social and racial-justice causes last year, and 19% said they wanted to become more knowledgeable about supporting such groups. Osili says researchers will need to track the data over time but that she hopes those numbers signal that philanthropy can play a meaningful role in building a more equitable world.
“Given the commitment in this area that we see from foundations and corporations, having individual donors at the table will help sustain it and make sure it doesn’t just disappear after a certain time,” Osili says.
The pandemic has caused many affluent donors to slow down and open their eyes to the “world of hurt” that racial and social injustices have caused, says Danielle Oristian York, executive director at 21/64 and an expert on multigenerational and next-generation philanthropy.
She says many wealthy people are now figuring out how to take what they have learned and use their wealth to start helping solve more of those problems. Her organization hosted a workshop to help affluent people put wealth and privilege to work for good.
“It’s an issue that many people struggle with now more than ever, and it isn’t a navel-gazing sort of experience of ‘poor me, I’m a wealthy person,’” Oristian York says. “It’s really about how do people understand their privilege and do something with it? How do you think about it and connect it to purpose?”
More wealthy donors shifted from organization-based giving to issues-based giving last year, meaning they were more likely to give to a charity that works on a cause they care about than give to a charity simply because they have supported it in the past.
Forty-five percent reported that they gave last year because of their affinity to an organization or because they had given to it year after year. That’s down from 54% in 2017. What’s more, 55% of rich donors age 40 or younger were significantly more likely to say that issues drove their giving decisions, compared with 40% of wealthy donors over age 40. Meanwhile, 48% of the older donors said nonprofit organizations drove their giving decisions, compared with 34% of the younger ones.
“For younger or next-gen donors, they start with issues they’re most interested in and then they give to organizations working in those areas rather than giving to the same organizations over and over again,” Osili says. “What that means for organizations is when they connect with donors, it has to be more about understanding what issues are most important to that donor and then tailoring the engagement around that.”
Thanks to the internet, information about giving and nonprofits is more readily available to donors than it was 20 years ago, Oristian York says. Donors today can learn more and then use their own sensibilities and values to evaluate nonprofits’ work, whereas in the past they had to rely on organizations to provide that information, she says.
“Good decisions are informed by our values, not necessarily what’s popular or what somebody else is doing, so young people who are in the thick of figuring out who they are, they are developing what we call their philanthropic identity,” Oristian York says. “If they are beginning to sit at funding tables with family members, values are a way to come together and figure out how to align rather than to sit separately with issues.”
Nearly 80% of wealthy households’ charitable giving in 2020 came directly from their personal assets and income. About 20% reported giving through charitable trusts, donor-advised funds, family foundations, or other giving vehicles, and some increased their use of those vehicles over previous years.
The most popular giving vehicle among respondents was a will with specific charitable provisions. Almost 17% of respondents said they had one, and 8% said they gave through a qualified charitable distribution from an Individual Retirement Account, the second most popular giving vehicle.
Giving through an IRA is efficient — and it’s only going to grow in popularity because of the tax benefit it provides, Bailey says. She says IRAs and other giving vehicles are “where the real wealth is and where the real opportunity for transformational giving lies,” so nonprofits should keep that in mind when seeking gifts from major donors.
This article was provided to The Associated Press by the Chronicle of Philanthropy. Maria Di Mento is a senior reporter at the Chronicle. Email: email@example.com. The AP and the Chronicle receive support from the Lilly Endowment for coverage of philanthropy and nonprofits. The AP and the Chronicle are solely responsible for all content. For all of AP’s philanthropy coverage, visit https://apnews.com/hub/philanthropy.