How do scholarships not run out of money?

Question

There are scholarships at my University that have been around for a few decades. Do people top them up constantly?

In: Economics

Answer 1

I was involved in setting up a scholarship fund in memory of a friend who passed away shortly after graduation. We had to fund a $30000 endowment to generate a $1000 annual scholarship, which is a 3.3% annual withdrawal rate. So as long as the endowment is invested in a portfolio that generates more than 3.3%, then it will never run out of money. The scholarship is still running strong 26 years later and the endowment has grown enough to generate a larger scholarship.