Why an endowment fund?
There seems to be some confusion about endowment funds. When I first heard about them I assumed endowment funds were reserved for wealthy families wanting to recognize a loved one who has passed on. Well, we weren’t dead, so we kept on learning.
Endowment funds are a way to provide charitable funds in perpetuity. For example, a fund of $50,000 could generate a minimum of $2,500 every year to a local charity, while the fund is also growing through interest earned. The Calgary Foundation, one of the largest community foundations in Canada with over $1B in managed funds, explains it this way: “The principal value of the endowment fund is kept intact, while the investment earnings can be distributable dollars used for charitable grants to nonprofits. Thus, an endowment fund can be held permanently, allowing donors to support causes they care about in perpetuity.”
Rate of projected growth of an endowment fund and amount distributed annually. For example, a fund that starts with $10,000, in 10 years will have distributed $5,475 and grown to $11,951.
Okay, so the idea of money going to a charity year after year is nice, but why not just give the money to the charity now? After all, at 5% being distributed annually, it will take some 20 years for the equivalent of $50,000 to be fully distributed. I think there are two reasons why endowment funds could be the right direction for charitable giving:
Celebrating our first donation, February 2025, with Richelle Leckey. of the Boys and Girls Club Okanagan.
1) you want your giving to continue long after your life ends.
There comes a time when you want to work hard to do good and a time when you are glad you did. While we still can, we want to contribute our own funds and raise even more. And we want to direct where and how those funds are employed. The endowment fund allows us to know that eventually that work is done and the giving continues. That’s a pretty sweet feeling.
2) you want to give some security to the charity(s) you support.
If you have ever volunteered or been on the Board of a not-for-profit you know that raising money is always a primary concern. Now, imagine if that same charity knew that a percent of their income was essentially guaranteed. It’s a game changer: now they can focus more on the work they are mandated to perform and less on bake sales. From Diana Newman’s book Nonprofit Essentials, Building Endowment “Because a permanent endowment is an invested pool of money that provides a reliable source of income in perpetuity, the organization can count on annual distributions for its charitable work.”
How to get started
We are not experts on endowment funds, but a good place to start is to speak with your financial planner or make an appointment with your local community foundation (there are over 200 in Canada.) Endowment funds are not for everyone, but they can be a wonderful way to contribute to a cause you really care about now and for many years in the future.
No Small Thing
Our goal is to build our endowment fund for the next 5 years (to 2030) through our own contributions and donations. In addition (and because we are impatient) we are distributing most of the money raised to support vulnerable youth getting free outdoor education to support a healthy, responsible life.
