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Invest in Next Generation Philanthropists for Future Returns

| Nov 13, 2015 | Business Planning

The age-old wisdom to begin investing early and diversify across asset classes dictates that time and energy should be invested not only where the money is now, but where it will be in the future – the emerging market. That is where future philanthropists, who may not have substantial financial giving power today but likely will in the future, enter the “investment portfolio” of a nonprofit.

In the financial industry, emerging markets are countries where stronger economic performance levels are expected. Investors consider them an outlet for expansion or new sources of revenue. Nonprofits can think of the Next Generation in much the same way, because according to the Center on Wealth and Philanthropy, the under-40 crowd stands to inherit $59 trillion in their lifetime. This massive wealth transfer will be the greatest in U.S. history.

Naturally, as an affluent generation controlling such a sizable amount of wealth, there is an opportunity for Generation X, Millennials and now Generation Z to be the most philanthropic our country has ever seen. Armed with such sizable assets, who knows what the Next Gen will be able to accomplish?

Still, there are potential pitfalls regarding the future philanthropic generation. Investors who consider buying into emergent markets first assess the risk – the process of emergence can be difficult and slow. There may be significant obstacles to overcome before that economy can yield big dividends.

Likewise, nonprofits face potential risks when trying to engage emergent donors. The primary challenge is identifying what makes this Next Generation tick. They look at philanthropy through a different lens than their parents or grandparents.

For starters, Next Gen donors see philanthropy as something that is ongoing from the time they begin careers as young adults, not something to start doing once they reach a predetermined life pinnacle. In the past, there was a standard expectation that young adults start a career, save money until they finally retire and are (hopefully) wealthy enough to start giving money way.

Next Gen philanthropists want to be engaged in causes they care about by offering up their time, knowledge and connections, not just their money. Nonprofits can struggle with young donor engagement because they don’t have the bandwidth to juggle and plan projects where future funders can roll up their sleeves and be put to work. Organizations have to find a way to reconcile this desire to be philanthropic from a young age. Some local groups are already getting it right, such as Fort Worth Opera.

FWOpera Scene, the organization’s group for members 20 – 39 years old, is founded on the idea that engaging young business professionals and educating them about the art of opera leads to long standing patronage and philanthropic giving.  The Opera strongly encourages a volunteer component within the group. Mike Martinez, a Fort Worth business owner and longtime opera supporter who began as a member of the organization’s young professional group, helped to establish an Ambassadors volunteer program. Now, after two years as an Ambassador, Mike will join the Fort Worth Opera board this fiscal year and continue to dedicate his time and thought leadership to the organization.

Aside from the generational differences in giving and philanthropy, maximizing the next generation of donors also takes time and effort. These future funders need to understand how to make the most of their resources through effective stewardship and smart charitable giving. They need training on how to be savvy philanthropists.

To help ensure local nonprofits have a pipeline of these knowledgeable donors who understand effective charitable giving, Community Foundation of North Texas is now launching WORTH: The Next Generation of Philanthropists. This membership group helps participants learn how to envision their legacy, find their philanthropic passion, assess where resources should be allocated and more.

It also leverages the power of collaborative giving that is so highly valued by Millennials. Participants in WORTH make a donation that builds an endowment for future community programs. In turn, their gifts are matched dollar-for-dollar so that WORTH members can then make a significant, collective grant to a charity of the group’s choice. WORTH is on track to award matching grants of $100,000 in the first three years of the program.

Just as civic leaders might invest in developing a well-educated workforce because it reaps measurable economic benefits, WORTH will produce a pool of savvy philanthropists who understand how to best support a thriving nonprofit community. This innovative program is unlike any other in our area. It will have an immediate, powerful impact and sustainability for grantmaking in the long-term.

The emerging philanthropic market holds potential to yield huge returns if time is taken to invest in them wisely. By creating WORTH, Community Foundation of North Texas is not only investing in those young, charitably-minded donors, but also in the future of local nonprofits for decades to come.

William L. Dismuke currently serves as vice chairman of the board of directors of the Community Foundation of North Texas.

For more details on this scholarship, check out Community Foundation of North Texas, please click here.