Empowering the Next Generation: Including Children in Charitable Giving
Involving children in charitable giving can instill a sense of responsibility and empathy, especially among inheritors in wealthy families. Teaching the next generation to value philanthropy helps them understand the importance of giving back and prepares them for future stewardship of family wealth. Here’s a look at a staged approach to involving children in charitable giving, with the goal of fostering their growth, and helping ensure they make informed and impactful decisions.
Stage 1: Finding and Understanding a Charity
This first step focuses on helping children find a charity they want the family to support. This stage involves researching various organizations, understanding their mission, and learning about their impact on the community. It’s crucial for children to connect with the charity’s mission, understand what the organization does, how it does it, and how it would use the donated money. Taking the time to research the inner workings of a charity helps children develop a thorough understanding of the causes they care about.
Once a child has selected a charity, they present it to the family as a worthy cause to which they will contribute a specific amount of money. This presentation requires them to justify the charity’s validity and the importance of its cause. By articulating their reasons for supporting the charity, children develop critical thinking and communication skills and a sense of ownership over their philanthropic choices.
Stage 2: Allocating Charitable Funds
In the second stage, parents flip the script by allowing children to manage a small portion of the family’s charitable funds. Whether these funds are part of a family foundation or a donor-advised fund, children receive the autonomy to choose how to allocate the money. This step allows inheritors to make financial decisions and understand the implications of their choices.
Parents can guide their children through the process, helping them evaluate potential recipients and consider factors such as the charity’s financial health, transparency, and effectiveness. By involving children in decision-making, they learn to assess and prioritize different charitable needs. This hands-on experience may contribute to the development of financial literacy and strategic thinking.
Stage 3: Managing Larger Sums
The final stage is more variable; each family can tailor it to its unique circumstances. For families with substantial wealth, this stage involves some families potentially choosing to give children greater responsibility over charitable distributions. This responsibility allows them to experience the challenges and rewards of managing significant sums of money.
Final Thoughts
Throughout this process, it’s essential for children to “show their work.” They should demonstrate that their choices are sound and based on good fundamentals. This might include providing detailed reports on their decision-making process, evaluating the impact of their donations, and reflecting on what they have learned. Each step up the ladder might take a few years, and there may be times when guidance is necessary. However, this gradual increase in responsibility helps children develop the skills and confidence needed to manage family wealth effectively.
This staged approach to charitable giving is a strategy that helps next-generation inheritors demonstrate their responsibility and capability. Families can instill a sense of purpose and social responsibility by involving children in philanthropy from a young age. Children learn that wealth is not just for personal gain but can positively impact the world.
Moreover, this approach fosters open communication about values, goals, and expectations. It encourages children to think critically, make informed decisions, and develop a lifelong commitment to giving back. As they mature and take on more significant roles in managing family wealth, these early experiences can serve as a strong foundation for their future responsibilities. By involving the next generation in charitable decision-making, families can help ensure that their philanthropic legacy continues to thrive and makes a difference in the world.
This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation.
Scooter Thomas
Financial Advisor
CFP®, ChSNC®, ChFC®