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

Math.

Say you have $10 million and you expect to earn
a 8%return on average.

To be safe, you decide to set aside 1% of that 8% to cover administrative costs and 2% to keep up with inflation over time. You could also set aside another 1% as a reserve for a bad year.

Say after year 1 you’ve earned an 8% return. You could give away $400,000 in scholarships and still know that the fund is very safe and will last a long time.