What is Endowment and Why Should Donors Support it?
Endowments are funds that an organization sets aside in investments where they accrue value to ensure the long-term financial stability of the organization.
What are Endowments?
Endowments are funds that an organization sets aside in investments where they accrue value to ensure the long-term financial stability of the organization. Endowments are most often associated with large, long-standing charities providing services that will always be needed.
What are the Benefits of Supporting Endowment?
An endowment provides financial security and flexibility to a charity. An organization with an endowment to rely on is better prepared to weather economic, social, and political shifts. Donors interested in providing this type of lasting support and stability should consider giving toward an endowment.
Which Organizations Benefit from Endowment?
Any organization providing services that will be needed in the long term can benefit from an endowment. Organizations like universities, museums, and libraries are prime examples. Hospitals are also commonly endowed. Many of these organizations, particularly well-established ones, already have large endowments.
Where Can Donors Fill Gaps Through Endowment?
Charities currently benefiting from endowments are disproportionately white-led. This is unsurprising given the historical disparities in support for such organizations, but it is not just leftover from a bygone era. In 2022, economic factors led to an increased gap between endowment for Historically Black Colleges and Universities (HBCUs) and Predominantly White Institutions. Donors have the opportunity to support HBCUs and other organizations led by people of color through endowments to help close the gap. Endowments for social change are excellent opportunities for donors who want to make a difference.
Before You Give to an Endowment
Like any charitable gift, supporting an endowment should be an informed decision. These questions will help guide your decision-making process:
Does this cause need endowment? An endowment is only the best fit for some organizations. The majority of charitable organizations should function to put themselves out of business. An endowment is most beneficial for organizations providing services that will always be necessary and may exist forever.
- Is this charity where I want to put my money? Make sure you trust a charity before you make your donation. Use Charity Navigator to find and vet organizations to build confidence in your decision.
- Would another organization benefit more from endowment? If the organization you are considering giving to already enjoys a large endowment, consider giving to another. Organizations led by people of color have great potential that endowment can help them achieve. These are much less likely to have already a sufficient endowment, meaning your donation can make a more significant impact.