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Who Gives the Most to Charity and Where Does It Go?

5 March 2015 in Investing Insights

During the financial crisis, many United States citizens needed to scale back on charitable donations, making it the longest period in nearly three decades that giving continually fell two years in a row. Since 2009 however, studies show that charitable giving has again been on the rise. For example, in 2013, Americans donated $335 billion  to charity, of which individuals gave $241 billion.

Each year, approximately 95.4% of households give to charity. And, on average, each household donates $2,974. Millennials (Generation Y), Generation X, Baby Boomers, and the “Matures” make up the majority of the giving population. Of these groups, Millennials represent 11% of the total giving, Gen X represents 20%, the Boomers 43%, and the Matures 26%. Out of these four age groups, the Boomers have donated the most dollars, totaling approximately $103.6 billion of the individual giving.

Generation-stats2Source: Web Marketing Today

GETTING BEYOND THE DOLLARS AND CENTS OF CHARITABLE GIVING

If you were asked which generation is currently the most impactful in terms of charitable giving, you may be inclined to answer “The Baby Boomers” based on the total dollar amount of their contributions. However, there are other factors to consider, namely donated time and campaigning, which also provide benefits and improvements to charitable organizations.

Time Donated

While Millennials have not been donating as much money as the Baby Boomers, studies have found that their giving equates to the Boomers when factored as a percentage of yearly income. Beyond this, Millennials have also been shown to be more generous when it comes to donating their time.

American-Contributions-by-Generation-660x330

Source: Marketing Charts, Harris Interactive

When considering a job, approximately 55% of Millennials are impacted by the company’s cause-related work in the community. Millennials are active in donating their time and often wish to participate along side their employer, wanting to make a difference in any way possible. In fact, those in Gen Y are the most likely to site, “desire to make the world a better place to live,” as a key motivator for their philanthropic time and monetary donations.

Charitable Campaigning

It can be awkward to ask friends and family for donation money, but of the four main generations, studies have shown that Millennials feel the most comfortable sharing the details of a great cause. This ease of asking is likely facilitated by the growth in social media and Gen Y’s capacity to use it effectively to raise funds. Gen Y is active promoting charitable organizations because of their familiarity with technology and its capabilities, and also because of their desires to bring positive change in the world.

Mint explains that Millennials want to feel like they are investing in a social movement, not just writing a check and disregarding other ways to help charitable organizations, like social shares and spreading awareness. Studies show that in 2011, 75% of Millennials gave to charitable organizations; just two years later (in 2013), the percent of Millennials giving rose to 87%.

FOUR REASONS TO GIVE TO CHARITY

Why do so many people contribute to charities? There are four likely reasons summarized below:

1) To help with basic needs – Generally speaking, much of the U.S. population feels fortunate to live in such a wealthy country. However, there are still more than 46 million Americans living below the poverty line, struggling to pay for housing and food, which can compel those with means to give back.

2) Matching gifts – People typically donate to help others, and when they realize that their contribution will be doubled (or tripled) by the generosity of another individual or organization, giving becomes much more exciting as the impact is increased.

3) The tax deduction – When people donate to a 501(c) (3) entity, their donations can be tax deductible. In general, people may prefer their money go to a charitable organization than to Uncle Sam if they qualify for a tax deduction.

4) Personal satisfaction – There is an element of satisfaction that comes with charitable giving when one’s efforts make a difference in someone else’s life. This can be said for monetary gifts as well as donating time and raising awareness. Getting involved with an organization can also lead to making new friends and feeling a sense of community.

WHERE DOES THE CHARITABLE GIVING GO?

The studies mentioned above demonstrate that the majority of the U.S. population is donating money to worthy causes each year, but where are all of these dollars actually going? In 2013, the majority of giving was divided into four major groups: 1) 31% of all donated dollars went to religious organizations, 2) 16% went to education, 3) 12% to human services, and 4) 11% went to grant-making foundations.

When researching charitable organizations, it is important to examine how donation dollars are used. If the charitable organization is managing expenses and focused on its cause, a reasonable ratio is for a minimum of about 66 cents of every dollar donated will go directly towards the cause at hand. An example of a cost effective organization is The American Red Cross, which puts approximately 92% of donations directly towards its programs, using less than 5% of donations for overhead costs.

Before donating money to a cause, you can utilize resources like the Better Business Bureau Wise Giving Alliance to check if charitable organizations are listed and how they are rated. One can also search GuideStar for 990 forms and other public data.

Motif Investing offers an assortment of investment products and services to help you invest in causes you support and your future. Discover your investing DNA and select motifs that suit your investment needs and interests as you build your portfolios.

For questions regarding how charitable contributions can affect your tax situation, you should contact your tax advisor to see how contributions could affect your personal situation.  Motif Investing does not provide tax, legal, or estate planning information.

Photo Credit: http://www.marketingcharts.com/traditional/most-popular-types-of-charitable-giving-by-generation-45365/attachment/harris-americans-charitable-contributions-by-generation-aug2014/

Photo Credit: http://webmarketingtoday.com/articles/113670-Future-of-Non-profits-Depends-on-Generation-Y/

  1. Jerry
    5 Mar at 3:44 pm

    I didn’t realize the average amount donated to charity is $3,000. Not bad! Is that a coincidence that the average tax refund is around $3,000 a well? Hmmm.

    I like to donate straight to a cause, a smaller organization due to the efficiency of the organization. I’m not so sure about the efficiency of a big oranization.

    Reply
  2. 11 Mar at 7:22 pm

    Donating appreciated stock is a smart way to give and I assume Millennials are Motif Investing’s primary constituency – what is Motif doing to encourage such giving? Motifs for charitable donations could be a cool new product. You would basically need to set up a donor-advised fund situation and then have an API exchange with Guidestar to get the available charities. Maybe down the road…

    Impact Investing is also a hot trend with high interest from Millennials but very little available on the public exchanges or for small amount investors. Crack that nut to be able to give Millenials access to a motif of impact investing options and I think it would be a good product for you.

    Reply
  3. Geri
    14 Jun at 3:08 am

    While I do not question Millennials “desire to make the world a better place”, I do believe the incentive for many, perhaps the majority, of them is to impress the boss. Volunteering for the company’s cause is a guaranteed way of doing that and should be considered as a fifth reason to give to charity. We will never know how many companies started or increased their charitable ways once they saw it as a cost-effective way to attract customers. But you can bet the percentage is high, and today’s younger workers are savvy enough to know that it is a great way to gain favor.

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