Family philanthropy offers opportunities for family members of all ages to experience the joy of giving, and it’s one of the best methods to help family members learn to work together, which is a key component for helping families to create a legacy that will survive multiple generations. It’s not just about giving money away; it’s about giving money away as a family.
The benefits of family philanthropy are extraordinary. It helps to solidify family values, while family members work together, communicate with each other and learn to trust one another. By making gifting decisions communally, younger family members can develop a wide variety of skills, including communication, negotiation, shared decision making, leadership, accountability, investing, financial literacy and responsibility to help others. These are all values that are necessary to prepare the younger generation to manage and expand the family’s wealth in the future.
Additional benefits of family philanthropy are well documented by many experts in the field. Research has shown that the act of giving can actually cause family members to have an increase in happiness.[i] Furthermore, according to a recent study from the Lily School of Philanthropy at Indiana University, children who perform acts of kindness experience increased wellbeing, popularity and acceptance among peers, which leads to better classroom behavior and higher academic achievement.[ii] Eileen Gallo and Jon Gallo state in Silver Spoon Kids: How Successful Parents Raise Responsible Children, “[Philanthropy] demonstrates [to children] that they are not just the recipient of giving but have the capacity for giving as well. They learn that satisfaction can be derived from money not just because it enables them to buy what they want, but because it can create better lives for others. Although children may intellectually grasp this concept, they also need to experience it as a participant in the philanthropic process.”[iii] Jay Hughes observes in Family Wealth: Keeping It in the Family, “Paradoxically, families often learn more about long-term wealth preservation through the process of learning to give away than by the process of learning to accumulate and spend.”[iv]
Ultimately, the unique benefit of family philanthropy is that it helps younger family members learn both independence (how to be self-sufficient and self-supporting) and interdependence (how to be emotionally, economically, ecologically and morally responsible to other family members). With such an overwhelmingly positive impact, family philanthropy should be a top consideration for every high-net-worth family beginning a journey toward healthy governance and looking to create a successful family legacy that will last for generations.
[i] Andreoni, J., “Giving with impure altruism: Application to charity and ricardian equivalence,” The Journal of Political Economy (1989); Andreoni, J., “Impure altruism and donations to public goods – a theory of warm glow giving,” Economic Journal (1990); Dunn, E. W., Aknin, L. B., & Norton, M. I., “Spending money on others promotes happiness,” Science (2008).
[ii] Layous K, Nelson SK, Oberle E, Schonert-Reichl KA, Lyubomirsky S., “Kindness Counts: Prompting Prosocial Behavior in Preadolescents Boosts Peer Acceptance and Well-Being,” PLoS ONE 7(12): e51380, doi:10.1371/journal.pone.0051380 (2012). See also Price-Mitchell, Marilyn, “Acts of Kindness: Key to Happiness for Children & Teens,” Psychology Today, (2013).
[iii] Gallo, E. & Gallo, J. J., Silver Spoon Kids: How Successful Parents Raise Responsible Children, McGraw-Hill (2001).
[iv] Hughes, James E. Jr., Family Wealth: Keeping It in the Family, Bloomberg Press (2004).
Justin Miller is a National Wealth Strategist at BNY Mellon.