Endowments Demystified: How a $25,000 Investment Can Help Secure Your Not-for-Profit’s Future
by Jennifer Turner, Vice President of Philanthropy, Central Indiana Community Foundation
For many of us, the word “endowment” can feel intimidating. It conjures up images of billion-dollar family foundations or Ivy League universities, entities that seem to exist in another dimension from our own.
In reality, an endowment is far more accessible – and versatile – than many realize.
For our purposes, an endowment is a financial asset invested by a not-for-profit and held like a long-term savings account (but with better investment returns). A percentage of the fund is available for withdrawal each year – usually 4-5%. It is the earnings from the investments that can provide revenue for the organization’s mission. The original (principal) investment remains intact to sustain the organization over the long term.
Let’s say a donor plans to leave your organization $100,000 in their estate plan. First off, congrats! But why might you want to use that gift to start an endowment rather than spend it? In a word: sustainability.