5 ways philanthropy can build the rising generation’s financial skills

The good of philanthropy can extend beyond serving your communities. It can build the business and financial acumen of your children and other family members.

Philanthropy offers lessons in money management and organization. It reinforces the value of work. It also enhances professional skills such as communication and accountability.

Exposure to philanthropic work at any age can build confidence, professional connections, and cultural awareness. Sharing the reasons for your philanthropy and your family values with your children also helps them understand the broader meaning and impact behind your giving.

“If you know what matters to you, you’ll have an easier time finding relevant organizations to support and you can be more transparent with grantees and your family members about your funding preferences,” said Micah McElroy, Assistant Director of Research at Effective Philanthropy Learning Initiative (EPLI) at Stanford University’s Center on Philanthropy And Civil Society. “You’ll also be more excited about giving when the promise is building a world that reflects what matters to you, not just managing taxes or checking-off an obligation.”

As you support the rising generations in your life, consider the following concrete ways to use philanthropy to strengthen their financial skills.

1. Help them volunteer

Volunteer work can expose the rising generation to community issues and illustrate how organizations go about solving specific challenges. It provides valuable work experience, networking skills and puts people in a situation where collaboration is necessary for the success of projects. These experiences also teach people how to manage themselves professionally.

Volunteering brings together people with a shared interest, across diverse backgrounds, and opens other community connections. With a little networking, those connections can often lead to finding a mentor, internship, job opportunity, or life-long meaningful connections within the community.

2. Let them recommend organizations for you to support

To help the rising generation understand how communities work, have them research nonprofits and choose one for your family to support. Encourage them to research the organization’s service model. They should be able to express the challenges being addressed by the nonprofit and the solutions the organization supports.

The goal is to help them identify the range of charitable options and understand how financial support can make an impact. By extension, this process of research and discovery helps them identify issues they are enthusiastic about and where they may want to devote more of their energy.

“What we advise is to seek a central goal for those interested in a common purpose, to be open to that evolving and changing over time,” said McElroy. “To listen to one another and the communities being served, to learn from what’s been done, to adjust and adapt as needed, and to move forward with sensitivity.”

As a bonus, tack on budget experience by designating a specific grant amount for their assignment. Understanding what challenges you can realistically address within a budget is key to solving organizational and community needs. Likewise, understanding how much something costs and the value it brings to a community is key to business decision-making. At the end of the exercise, don’t forget to ask them what they learned – not just about the organizations but the process as a whole.

3. Have them review how your giving is making an impact

Share your current giving plans with your rising generation family members. Then, let them investigate how your financial support is helping an organization’s mission. Understanding how organizations use donations is educational. It also illustrates there is more than one way to tackle an issue.

Ask whether your gifts might have been better spent. Should you have given more? Should you have given to a different organization or a more specific purpose? What else does the nonprofit need to achieve their desired outcomes? Use open-ended questions to encourage them to share their own ideas and identify new approaches.

By reviewing your giving, they also can begin to understand the values you bring to your charitable giving. Seeing what’s working, identifying how things could improve, and uncovering new ideas all further problem-solving and strategic planning skills.

4. Give them board experience

If your family members are ready for direct nonprofit participation, find a role for them in your philanthropic work. If you have a private foundation, add them to the board or a committee. Involvement in formal governance provides exposure to ongoing financial and budget discussions, investment decisions, tax issues and operational challenges.

They also may be given formal assignments. Ask them to conduct a budget review or share a fundraising strategy. Ask them to review your grant making process, or new technology to streamline workflows. Even basic tasks like reviewing regular correspondence or unsolicited grant requests are a way to expose them to the day-to-day working of an organization. If you do not have a private foundation, similar roles can sometimes be developed around less formal charitable work. They could serve as advisors for your donor-advised fund. They could help in selecting among the charitable vehicles for your individual gifting. Understanding the basic tax advantages of donating to a nonprofit builds knowledge and puts focus on the public policy aspect of supporting charitable giving.

5. Give them money to make their own donations

To build even more depth to their business acumen, give them money to make their own charitable donations. This process can be accomplished through a safe and controlled environment, especially if you open a donor advised fund.

If you have a private foundation, dollars from the foundation can establish a donor advised fund. The rising generation can then be in charge of advising on grants from the fund. If you want guardrails, you could be advisers as well. But consider giving them the chance to figure it out on their own. Suggest they create a mission statement for their giving, defining an area of focus, goals and desired impact. If they ask, help them decide how long they want to make their charitable funds last.

“Enabling younger family members to pursue their individual aspirations can, under certain circumstances, strengthen the family’s collective capacity for philanthropy,” said Stanford’s McElroy. “We’ve found that the rising generation feels more capable of satisfying their goals within their families by finding success outside of their family.”

If you want to take a simpler approach, assign them a dollar amount and let them decide where to donate. Even better, encourage them to donate their own money and agree to match it. Like the other approaches, this can provide exposure to budgeting, tax, investment, and planning skills, while illustrating firsthand the impact of charitable giving.

Creating generational impact

Exposing the rising generation to philanthropic work can build a range of business, communication and networking skills. It also introduces them to the value of supporting a cause. You’ll be reinforcing accountability, the importance of teamwork, and illustrating ways to problem-solve. At the same time, you can create a meaningful impact on their lives and the charities you (and they) support.