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A Donor's Declaration of Independence
Source: The Chronicle of Higher Education  ·  April 3, 2011  ·  Excerpt

When my father, an analytical chemist, died last May, my mother and I decided to honor him by endowing a scholarship fund for economically disadvantaged, academically deserving chemistry majors at our state university. Our intent was to provide one full-tuition scholarship annually to a student who had completed no less than a year of college-level course work with at least a 3.0 average and had demonstrated a commitment to a career in the sciences. We assumed that our substantial donation would continue to generate adequate funds for such scholarships in future years despite inflation, since we thought the university's investment professionals were certain to achieve returns that would meet—or more likely beat—inflationary trends.

But the way endowments actually work made a naïve fantasy of that simple, heartfelt dream. The university would provide to our scholarship recipients only a fraction of what our money was expected to earn each year. The rest of it—usually most of it, we eventually discovered—would be plowed back into the endowment "for future generations." Even during the boom years of the stock market, when the endowment was realizing double-digit returns, it had paid out only 4 percent. In 2009 it was reportedly paying just 3 percent but has since returned to the 4-percent rate. This, it turns out, is only slightly less than most endowment-payout rates across the country. Today nearly three-quarters of all colleges and universities set their endowment spending at about 5 percent.

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Our take
This story is a stark reminder of one of the hallmarks of modern philanthropy: giving opportunities are never one-size-fits-all and must be tailored to individual donors. The sheer number of nonprofit organizations competing for gifts—and the ever-growing array of financial tools and gift formats—coupled with a growing expectation of transparency, stewardship and sound investment principles have combined to create an atmosphere of complete focus on the donor. Each and every donor has different goals, objectives, passions, and motives.

While it is regrettable that the full range of options for the scholarship was not explained to Ms. Kronstadt's family earlier, she ultimately decided that the joy of seeing the students they support today outweighed the benefits of waiting until tomorrow.

How does your organization educate and promote giving options among its donors? Contact us now for guidance answering these and other questions:

  • What is the overall tone of my organization's communication with donors? Are we telling them what their options are, or asking them how they would like to contribute?
  • How can I take advantage of new financial tools, options or trends in charitable giving? What information can I offer to help educate and motivate prospective donors?


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