Endowments - Undeserving of a Bad Rap By Christina M Thomas

Do you ever wonder how it is that supposedly non-profit organizations always seem to have money? After all, the charitable donations they receive have to go to operating expenses, as well as the salaries of the organizers, right? Well, not quite, and not usually. There are certain investment vehicles that are tailor-made to keep such institutions going.
An endowment is one such investment vehicle; indeed, it is the investment vehicle of choice for institutions - ranging from colleges, libraries, museums and many others that are not geared towards the selling of goods to maintain financial standing. For universities, their entire economic infrastructure is supported by endowment gifts from wealthy alumni, which then enjoy continuously compounding interest on the untouched (and often untouchable, by the rules of the endowment) principal. It is easy to see that a direct correlation exists between the age of an institution such as a university, and its wealth; Harvard is both the oldest and richest university for precisely these reasons - alumni have been pumping its coffers for nearly 375 years as of 2011! Harvard's premier current endowment of $27.4 billion returns interest of about 11%, or $3 billion of operating capital per year. That's enough to give each one of its twenty-one thousand students $12000 per month for the year! The other top Ivy League schools aren't terribly far behind, which exposes yet another correlation: these very old and very rich schools are rarely boot-strapped by the economy in providing their students with the most up-to-date laboratories in the world.
The endowment, then, is more often than not confined to the wealthy. With a return of well over 5%, but almost always under 11%, it takes a large sum of money to realize a substantial yearly windfall, if you will, sufficient to take care of the expenses of whatever endeavor the giver(s) wish to pursue or fund. For the private individual, it usually takes a lifetime commitment to raising the necessary capital, such that an endowment can be eventually established. Which is not to say saving up money for the establishment of an endowment isn't a good idea, as even a modest sum (by the standards of the wealthy) of, say, $200,000 can yield enough income at a respectable rate of interest to take care of the expenses associated with a home or other such residence (think property tax and/or maintenance fees). Ultimately, there is a very good reason why the most prestigious and longest-lasting institutions or entities are supported by endowments.

Christina Thomas counts insurance, endowments and other investment securities among her many interests; there just aren't many opportunities to plan ones retirement in fast-changing times. Endowments, can be a great boon for those that plan ahead well and get a good and trustworthy insurance agent.

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