Endowed funds have three components:
- The Principal – or the original gift that is invested and not spent. Typically, the principal is invested and not spent “in perpetuity,” or forever (or as long as the organization exists).
- The Return – or the earnings and interest that the principal generates. Typically, the principal is invested in various markets with the aim to generate a specific target growth goal – say 7% annually – so that some of the return can be used to support the purpose of the endowed fund.
- The Spend – or the amount of the total market value that will be spent each year on the purpose of the endowed fund. Typically, a spend rate of 4% annually would mean that 4% of the market value of the fund in any year will be spent in support of the purpose. The fact that the aim is to earn 7% annually and only spend 4% means that the fund’s market value will, hopefully, continue to grow over time.
The components of endowed funds can be a helpful lens through which we view the major components of our lives as well. For example:
Personal Wellbeing and Health as conceived as an endowment:
- The Principal – Built from our sleep and rest, our movement, and our nutrition
- The Return – We receive energy, focus, and capacity
- The Spend – Prioritize rest, sleep, exercise, and eating habits so we’re not “overdrawing” and burning out
Relationships as conceived as an endowment:
- The Principal – Built from our trust-building efforts, shared experiences, and caring for others
- The Return – We receive feelings of love, connection, joy, peace, and support
- The Spend – Show up for others, think of and act in the best interests of others, serve others, be curious about others, and collaborate
Time as conceived as an endowment:
- The Principal – Built from the finite 24 hours in each day
- The Return – We receive the opportunity, responsibility, and accountability for how we use each moment
- The Spend – Prioritize what is important to us and those around us while paying attention to how we get distracted (and minimize those distractions)
The aim of our life’s major endowments should be to use The Spend purposefully in our lives while at the same time using part of The Return to ensure the value of The Principal continues to grow over time.
Just like a financial endowment, we want our life’s endowments to benefit not just us, but also those we care deeply about. And, we want those benefits not only for today, but “in perpetuity.”
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