When my My Brother’s Keeper Scholarship co-founder Kevin Jackson and I first publicly announced on June 1 that we had created an endowment fund at UNC Charlotte, we were met with kudos, congratulations and support. But we were also met with questions; lots and lots of questions.
Since we had begun the process almost two years prior to announcing it, had cut through all the red tape and signed all the papers, we were so well versed in how endowments work that we could probably teach a course on it.
OK, we’re actually not that well versed, but we get by.
Anyhow, in our haste, we were so excited about telling everyone we started an endowment that we didn’t stop to tell anyone what an endowment was – and it turns out, many of them had no idea.
I decided to make this week’s blog entry a not-so-juicy introductory course on how endowments work and what purpose they serve.
We’ll start with the University’s definition and corresponding explanation:
An endowment is an investment in the future and a gift that lives in perpetuity. Donors create a legacy by specifying the name and purpose of an endowed fund. Endowed funds can be used for scholarships, faculty research or professional development, program support or other University priorities.
The corpus of an endowed fund remains untouched. The gift is invested with two goals:
1. Making the principal grow faster than inflation
2. Providing expendable income for the donor’s specified purpose
At UNC Charlotte a minimum of $25,000 is required to fund an endowment and the gift may be spread over five years. Until the fund is fully endowed, no distributions will be made.
UNC Charlotte’s payout rate is currently 4.5%, meaning that of the interest earned 4.5% will be distributed to the donor specified program and the remaining earnings will be reinvested into the principal of the fund to help build the corpus.
Now lets break it down into regular terms.
Essentially, the benefit of an endowment is that you have a perpetual source of funding for your cause, even if you never contribute any more funds above the $25,000 minimum commitment. In other words, once we’ve hit the $25K level, 4.5% in interest (or $1,125 per year) will be made available every year to go toward a scholarship. As the principal grows, so does the corresponding interest payout.
The benefit of endowments is that, although the payouts may be small in comparison to the principal, they alleviate the need to continually raise scholarship funds every year.
Kevin and I have personally pledged to bring the fund to full endowment status over a five-year period. We each contribute a little over $200 a month to the fund, or roughly $2,500 per year, per person. At the end of the five years, the endowment will be fully funded and will then start earning interest toward paying out the scholarships.
Our plan is to keep growing the endowment above the minimum level, bit by bit, to the point where we can award multiple high-level scholarships of $5,000 or more each year.
Our process is measured and gradual. But we had to start somewhere, and we’re in it for the long haul. In an era of record-level powerhouse donations to academia, we hope to debunk the notion that educational philanthropy is limited to the old, the wealthy and the corporate-funded.
While we’re at it, we may just prove that every now and again, slow and steady can still win the race.
The My Brother’s Keeper Scholarship at the University of North Carolina at Charlotte is an endowment fund targeted to Black males majoring in the Science, Technology, Engineering and Math (STEM) fields at UNCC. Learn more at www.unccmybrotherskeeper.org.