The Power of Endowments

Updated: Jul 16

We often hear the term endowment and may understand that it can be a force for

good—but how does it actually work?

An endowment is a permanent fund where donations are invested. The original

donations are called the principal, and they remain intact. Over time, the fund grows

through additional contributions and investment returns. After an initial investment

period (typically a year or more), a spending policy is applied. At the Faribault

Foundation, our current policy allows for 5% of the fund’s value to be distributed

annually as a grant.

This approach ensures that the fund not only provides meaningful support each year but

also continues to grow—sustained by reinvested earnings and new donations. It’s the

definition of long-term impact.

To establish an endowment at the Faribault Foundation, a minimum of $10,000 is

required. That level of investment will generate a $500 annual grant—forever. Now

imagine the impact of a $1 million endowment. That fund would generate $50,000 in

grants every year, while continuing to grow and give for generations to come.

Currently, the Faribault Foundation holds 13 endowments dedicated to strengthening

our community. In 2023, we quietly launched the Hand Up Campaign, an effort to build

the very foundation of our Foundation. Donors who pledged $25,000 or more had their

gift split in two: half went into an operating reserve fund to support Foundation

operations, and the other half into the newly created Founders Fund Endowment—our

first discretionary fund to benefit the broader Faribault community.

The Founders Fund began receiving donations in June 2023. Fast forward to July 2025,

and the fund is already making an impact: two inaugural grants of $10,000 each have

been awarded to Community Café and Faribault Cares, two local nonprofits continuing

their essential work.

These grants demonstrate the real power of an endowment—how a single fund,

thoughtfully established, can provide ongoing support year after year. And this is just the

beginning. As these funds grow, so too will their annual impact.

The Faribault Foundation stewards several types of endowments:

 Discretionary Endowments, like the Founders Fund, address the community’s

most pressing and evolving needs.

 Designated Endowments are created to support a specific nonprofit annually.

 Field of Interest Endowments are established by individuals or groups who want

to support a particular area, such as education, the arts, or youth development.

 Endowed Donor Advised Funds established by individuals or families who want

to remain actively involved in recommending annual grants from their fund, while

ensuring long-term support for the causes they care about.

To learn more about the endowments already established, how you can support one,

visit the Faribault Foundation’s website. If your favorite nonprofit has an endowment,

consider contributing to it. Even a small donation helps fuel long-term impact.

Endowments are simple, effective, and powerful tools. If you're curious about starting

one—or want to explore other philanthropic options—we’d love to have that

conversation with you.

Laura Bock is the executive director of the Faribault Foundation. (507)805-8800,

Comments