Build an Endowment Fund for Ongoing Support
What is an Endowment Fund?
It is money invested and the interest is used for specific purposes. The principle is left in the fund to create more interest income. There’s typically a professional wealth manager that manages the fund with and agreement from your board. It’s a long-term financial strategy rather than short-term thinking.
Most start-up nonprofits think about the current year’s budget rather than long-term strategy. You can do both. Thinking long-term provides security as well as for legacy operations. This allows for the organization to continue after you are no longer available to lead.
How to get started:
Review current budget and project up to 3 years ahead. Add a line item for funding the endowment. Open a fund, choose a fund manager, appoint trustees from your BOD to oversee the investments, start working on a planned giving strategy and presentation. Create a board policy for the fund – how the interest will be used – for example not for operating costs but for special projects, etc.
Alerts
This is not a “rainy day fund” that you raid when income gets low and you can dip into it casually. It’s a fund for long-term growth. Don’t put too much emphasis on the endowment fund and ignore the regular fundraising for operations, however. Don’t brag if you get a large bequest because it might make donors think that you don’t need their funding for current budget items. Be transparent and educate supporters about how the fund will provide long-term stability and security.
Stary Now
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