My Mother’s Memorial Scholarship Fund: The Power of the Endowment Style of Philanthropy

My Mother’s Scholarship Fund is a perfect example of why the endowment style of philanthropy is so appropriate for addressing an enduring need.

Background

My mother passed away in 1991 of lung cancer.  One of the things that my father and the family did in conjunction with her final arrangements was to establish a memorial scholarship fund at the local college where she had studied.  My mother had been pursuing her bachelor of science in nursing, but she did not finish before she got sick and passed away.  

Dad and the family decided it would be an appropriate way to remember her and to create a legacy for her by establishing this scholarship fund; so it was done and has been successful for the last 22 years.

Mom’s memorial scholarship fund pays out two $200 scholarships each year, for a total of $400 per year.  Contributions traditionally come from the family, primarily from Dad and my brothers.

Until last year, these contributions went into what is known as a “spendable account”, where money comes in, and the same money goes out; a spendable account is conceptually very similar to a checking account.

And again, this financing worked well for 22 years.

The Spendable Account is Converted to an Endowment

During this time (November 2013), I had been involved in establishing the Colonel Lynn B. Stull Memorial Army ROTC Endowment at Georgia State University, which you can read about in a previous blog post.

I had seen the mechanics and the benefits of an endowment while working on Colonel Stull’s endowment at Georgia State, and these ideas were in the forefront of my mind at that time.

I presented the idea to my father at Thanksgiving dinner in 2013.  We were at Dave and Debbie’s house; Julie, Dad, my aunt Dottie, and I were also in attendance. 

We were talking about this year’s Christmas gifts, and who was giving what to whom.  Because we all have unique and different senses of style and taste, we usually fail very badly in giving gifts that each other would truly like, so we instead resort to money.  Typically, we all donate money to our Mom’s scholarship fund in each other’s honor and behalf.

It was during this dinner that I suggested to Dad that we convert Mom’s scholarship fund into an endowment. Dad and the rest of the group were interested, so I took a couple of minutes to explain how an endowment works and what benefits an endowment would offer a group in our situation.

A couple of weeks later, Dad reached out to the college’s foundation, and entered into discussions with them about turning Mom’s scholarship fund into an endowment.

Long story short:  this came to pass.  Dad made a $10,000 contribution, others made smaller contributions, the foundation restricted and endowed the funds, and Mom’s memorial scholarship fund was converted into an endowment.

With Dad’s and other recent contributions, as well as the money that was in the spendable account when it was converted, the total value of the endowment now exceeds $13,000, which will produce about $520 in scholarship dollars (that will grow with inflation) for nursing Students at that college, year in and year out, forever.

And although we will continue to contribute to Mom’s endowment, no one needs to anymore.  If all of us fell off the face of the Earth today, those two scholarships will continue to be available every year, now until forever, for deserving and worthy nursing Students.

Lessons Learned

Using this story of how we converted my mother’s scholarship fund from a spendable account into an endowment is, I think, a very good case study of why the endowment style of philanthropy is so powerful.

What Was

First, consider what actually happened:  from 1992 to 2013 (22 years), at least $400 was contributed every year to the spendable account that was associated with Mom’s scholarship fund.  This resulted in:

• A total of at least $8,800 contributed,
• $8,800 paid out (no increase to account for inflation, the impact of these scholarships declined over the years),
• A balance in the spendable account near zero, and
• A scholarship fund that continued to be dependent on contributions each year to survive.

What Could Have Been

Now, consider what would have happened if we had started with an endowment.  If we would have endowed $10,000 22 years ago (and no further contributions were made), this endowment:

• Would have paid out $12,214 ($8,800 in 1992 dollars).
• Would be distributing approximately $744 each year in 2013 dollars (the equivalent of $400 each year in 1992 dollars),
• Would have a principal balance of approximately $19,161 ($10,000 in 1992 dollars), and
• Would continue whether or not anyone contributed another cent ever again.

Important Note #1:  As you can see, inflation protection is yet another benefit of employing the endowment style of philanthropy:  the principal invested grows with inflation, which prevents the financial support from losing its impact due to inflation erosion.

Important Note #2:  As I write this blog post, it occurs to me that if Dad and the rest of the family read this, they may become upset by comparing what was to what could have been.  I hope this is not the case, and here’s why:  1) perhaps we did not start Mom’s scholarship fund in the most appropriate manner (an endowment), but at least we started it; 2) a lot of nursing Students (44, to be exact) were helped in the last 22 years; and 3) we have since transformed the scholarship fund to an endowment, so the data for the next 22 years will look more like what could have been than what was.

Conclusion

Providing financial assistance to nursing Students in honor of our mother at the college she attended is an enduring need.  As you can see, the endowment style of philanthropy is absolutely and clearly the appropriate charitable vehicle for addressing this enduring need.

So for those individuals and organizations that want to stop participating in the “hand-to-mouth” style of philanthropy, and instead create a source of sustainable, enduring financial support for those charities that they care about, the endowment style of philanthropy is clearly the appropriate solution.

As always, I invite you to get involved:  if you think that you, your organization, your friend, your associate, or your client may be interested in enjoying the benefits associated with establishing a charitable endowment, I encourage you to contact me directly (928.420.4035, [email protected]).  I would be more than happy to discuss the issue, to see if a charitable endowment through The Enduring Charity Foundation is the right answer for your or yours.

Thank You for taking the time to read this post, and please do not hesitate to contact me if we can be of service.

Very Respectfully,

Josh

About The Enduring Charity Foundation

The Enduring Charity Foundation is an IRS-approved 501c3 non-profit foundation that helps individuals, for-profit businesses, and non-profit organizations establish, maintain, and grow their own charitable endowments and micro-endowments, in order to provide an enduring source of financial support for those charities that they care about.

Our vision is to develop and grow into a multi-million dollar non-profit foundation that will provide hundreds of thousands of dollars each year to designated charitable organizations, year in and year out, forever.

In conjunction with its mission and operations, The Enduring Charity Foundation maintains three core values:  1) charity - support worthy and deserving charitable organizations; 2) perpetuity - create an enduring source of support through an endowment model; and 3) trust - conduct all activities and operations in a manner that honors the trust of our Endowment Founders, Donors, and their designated charities.

Learn more and get involved at https://www.enduringcharity.org

About the Author

Josh Brooks, PhD is the founder and president of The Enduring Charity Foundation.  Josh’s full-time career is as an active duty aviation officer in the U.S. Army, with more than 17 years of service.

A deep sense of gratitude for all of the blessings in his life, combined with his desire to get involved in philanthropy, led Josh to found The Enduring Charity Foundation with his wife Julie, war buddy Wayne, and brother Dave.

Josh intends to apply those values that he learned in the Army - duty, integrity, and selfless service - in leading The Enduring Charity Foundation.

You can learn more about and connect with Josh by viewing his LinkedIn profile here.