In this episode of The First Day from The Fund Raising School, Bill Stanczykiewicz, Ed.D., welcomes Karen Houghton, CEO and Founder of Infinite Giving, for a clear, lively, and highly practical conversation about endowments: what they are, why they matter, and when nonprofits should start thinking about them. Karen brings a rare mix of nonprofit leadership, technology, finance, venture capital, and board service to the topic, which means she can explain endowments without making everyone reach for a legal dictionary and a strong cup of coffee. Her big message is that nonprofits are part of the “nonprofit sector,” not the “not-profit sector,” and when organizations generate a surplus, they can use it strategically to build long-term sustainability.

Bill and Karen start with the basics: an endowment is money set aside, invested, and used to provide ongoing support for an organization’s mission. In practical terms, a nonprofit might invest the principal, allow it to grow, and then draw a percentage each year, often around 5%, to support operations or programs. Karen gives the example of a $10 million endowment producing roughly $500,000 each year. The goal is not to hoard money, but to create reliable, recurring support that can keep pace with inflation and serve the mission for generations.

The conversation also tackles the nuts and bolts of getting started. Karen explains that endowments do not have to be wildly complicated; organizations can often begin by setting aside funds, opening an investment or brokerage account, and creating key documents such as an endowment agreement and an investment policy statement. She especially encourages small and midsize nonprofits to consider a quasi-endowment, also called a board-restricted endowment, because it gives the organization flexibility while still establishing a long-term financial framework. But she offers one very important caution: if an organization does not yet have reserve funds, the first step is not an endowment. First build the six-month emergency reserve fund. Then move from scarcity to strategy to sustainability.

Bill and Karen close by connecting endowments directly to fundraising, donor intent, and organizational confidence. Karen shares a cautionary tale about a nonprofit that turned down a $1 million endowment gift because the board wanted the money for immediate use, only to watch the donor give it elsewhere to an organization that honored the donor’s legacy vision. She also cites research showing that 69% of major donors are more likely to give to nonprofits that demonstrate strong leadership and clear financial strategy. The takeaway is crisp: endowments are not for every organization at every moment, but when the timing is right, they can help nonprofits honor donors, stabilize programs, attract legacy gifts, and plan in 10-year cycles instead of 10-minute panic bursts.