2 Reasons Why Your Youth-Focused Nonprofit Should Establish an Endowment
Between the merry-go-round of government changes, staffing shortages and a fluctuating financial market, many youth-focused nonprofits lack one of the most vital tools in securing their future–an endowment.
An endowment is a permanently restricted fund, consisting of a portfolio of assets that is overseen by a qualified manager. The fund grows through the contributions of donors who choose to invest in the nonprofit and its future.
With an endowment, your nonprofit is more likely to be financially stable than your counterparts without an endowment. This stability gives you a much-needed cushion between your organization and the outside forces threatening your future.
If your organization doesn’t yet have an endowment, here are two reasons to establish one.
1. Project Sustainability and Strength
After various economic booms and busts and the craziness that ensued thanks to the COVID pandemic, your nonprofit will continue to battle the unspoken, yet very real, question of – will your organization be around tomorrow?
Donors, clients, volunteers and employees want to believe that your nonprofit will be around to fulfill its mission. Contributions (or investments in your cause) will partially be based on the perception of how long people believe your organization can support the children and youth your organization serves. This perceived sustainability can help serve as a deciding factor in many important decisions like the size of a donor’s donation, whether a client chooses to utilize your services or the level of commitment a volunteer or employee will offer.
An endowment can ease lingering fears about the future by communicating both internally and externally that your organization is built to last and is serious about planning ahead.
Learn best practices (and pitfalls to avoid) when managing an endowment for your nonprofit in this free on-demand webinar.
2. Attract Big Gifts and Donations
Endowments are often beacons for donors with deep pockets. This beacon often shines brightest for those looking to memorialize a family name and often correlates with large gifts for specific purposes (think dedicated buildings, scholarship funds, etc.).
For example, Joseph Smith gifts a large number of funds to the endowment of his son’s after-school sports program that supports children with disabilities. With this fund, Joseph decides where the money gets allocated. In this case, he wants his donation to fund a new indoor soccer field built in honor of his grandfather.
By restricting the funds to the construction of and supplies to operate the field, Joseph ensures that his donation goes to a project that is important to him and that his grandfather’s namesake is immortalized in the naming of the soccer field.
As a bonus, since Joseph is that much more invested in the program and its future, he’s likely to keep contributing to fundraisers that pop up throughout the year.
How Can You Build an Endowment or Strengthen Your Current Endowment?
The trick to growing and building a robust endowment comes in understanding things like how to create a sound investment policy, get the funds to grow your endowment and the basics of an endowment fund policy statement. You might also want to watch a webinar on best practices in endowment management or sit down with an expert to learn how to make your fund more attractive to wealthy donors.
Contact us online or call 800.899.4623.
Editor's note: this article was originally published in 2016. It was updated with new information in 2022.
Published on January 17, 2023