Written by Dan Handford
Vice Chair and Secretary / Fortify Foundation
The word “endowment” can be intimidating when you first hear about it. This is because you may not know much about it. Remember back when you first entered college to become an educator and how intimidating this was at first. Now that you have been working in the education field for many years, it has become an “old hat” to you and is no longer a point of intimidation.
You likely have heard about endowments when talking with other people or maybe in the news when large universities, including Liberty University or Harvard University, talk about how many billions of dollars they have socked away. We will discuss, at the end of this article, how these institutions have amassed huge endowments and how your school, no matter the size, small, medium, or large, can work towards the same thing.
Let’s talk about endowments first so you are more comfortable with the concept.
What is an Endowment?
An endowment is simply the idea of putting money aside every year to plan for the long term aspect of your organization. One of the unique distinctions with an endowment versus other types of funds in your organization is that the principle is never spent. The money is invested wisely with an investment banker based on a standardized investment policy to protect the initial capital and to allow the endowment to grow over time.
Once you decide the endowment has grown to a certain point, the institution may decide to start spending some of the funds each year. This is typically 4% of the overall endowment size. For example, if you have $250,000 in your endowment, then you would be able to spend $10,000 each year off the endowment. Once you have $1mil in your endowment, then you would be able to spend $40,000 year over year.
For these large institutions that have $1B in their endowment, they would be able to spend $40mil per year. And this is all in addition to the tuition they are receiving from students attending their institution each year.
You Must Start Somewhere
Now these may sound like really large numbers for a school that does not have an endowment in place right now. However, these institutions have been building these endowments for decades. If they never started their endowment funds many decades ago, then they would never have ended up with these multi-million (or multi-billion) dollar endowments.
Setup an Endowment for Your School
If you have heard about and followed us here at Fortify, you likely already know how to get started. If not, the best thing for you to do is contact our Executive Director, Brandon Allen (brandon@fortifyfoundation.com or call him direct at +1-803-615-3037), and schedule a call with him to discuss how to easily setup an endowment for your school through Fortify Foundation. I would suggest doing this now even if you don’t have a huge amount to get started with.
Several of the schools that we work with have started with what they can even if it’s a small amount like $10,000. Don’t let this hold you back.
Contact Brandon today so you can get your school on track for a healthy long-term future.
The Purpose of Fortify Foundation
Fortify Foundation was started to only work alongside Christian, private schools and help them implement an endowment to allow schools to thrive and not just survive. At Fortify, we know that planning for the long-term success of an organization will allow more students to be taught a biblical worldview and will also reach more people for Christ in the long-run. This is exactly what Fortify Foundation was created for—Kingdom Building!
Once you have your endowment setup, now is the time to start planning to add to it every year. If you don’t have a plan to add to your endowment then you won’t see value that the compound effect has on your fund.
Let’s talk about two strategies to easily implement in your school to immediately start growing your endowment each year.
First Strategy To Build Your Endowment
The easiest thing to do is to make a standard financial policy that any monies raised for your organization, at least 10% should be put into the endowment. This means that any fundraiser that you do, including, but not limited to, annual gala, golf event, selling candy, bake sales, booster clubs, musicals, plays, et cetera you should set aside 10% of each of those and put it into your endowment.
You may be doing these fundraisers, like the annual gala or golf tournament, to pay for a new computer lab, replacing science lab equipment, increasing teacher salaries, or you name it, but at least 10% you can easily put away for building your endowment.
Think About Your Personal Finances
Think about your own personal finances for a minute:
Are you planning for the future?
Are you putting money aside each year with the money that you earn for work to plan for when you want to retire?
And I am sure you are also investing that money via your 401K, 403B, IRA, or other retirement plan. Wait…sounds like you are planning for the future by having your own personal endowment that you are building for the long term.
When you retire you will likely just be spending off the return each year. If you are doing this personally then you can see how important it is for an organization to do as well.
If you are typically raising $10,000 a year in short-term projects, then $1,000 would be set aside for your endowment each year. If you are typically raising $100,000 a year, then $10,000 would be available to set aside each year.
Second Strategy To Build Your Endowment
The second strategy for growing your endowment is one of the best options as it ensures a consistent annual growth. You should plan to increase tuition by $100 per student next school year. This will allow you to allocate $100 per student for building your endowment.
This is very easy to do and easy to get setup. It must be part of the budget though so start planning now for the next school year.
If you have 300 students, you would be putting away $30,000 per year into a long term endowment to plan for the future success of your organization.
Your student body may be larger, like 1,000 students, and this would allow you to add $100,000 per year to your endowment.
How Liberty and Harvard Build Their Endowments
This is exactly how large institutions, like Liberty University and Harvard University, have been able to amass a large amount of money in their endowments. They budget for it. Yes, that’s right! They budget for the long term and plan to put money away into their endowments each year.
Now these large universities also have large donors that continue to add to their endowments via large gifts and via estates from their alumni that are passed on to them. And this is another way Fortify Foundation can help your school is by helping your donors strategize an end-of-life plan to donate assets such as stocks, bonds, real estate businesses, et cetera.
Setting a Target for the Size of Your Endowment
Most organizations set a target size for their endowment before they start spending money off it. This is something that you should discuss internally so you can have a goal in mind for the endowment.
Become The Endowment Ambassador For Your School
So what are you waiting for? Are you going to be the hero for the long-term success of your school or are you going to be the one that doesn’t move forward and potentially holds back your school from future success?
This future success of your school also leads to building God’s Kingdom. At Fortify, we want to see you succeed so we can together build the Kingdom of God.
Contact Brandon today to start the conversation and become the endowment ambassador for your school today!