Endowment Definition

In personal finances, an endowment refers to funds donated to an institution as a source of income. For example, a multimillionaire might provide a million dollars to a local college as an endorsement (probably having a building named for them in the process). Whereas a monetary gift-e.g., a smaller sum-is intended to be expended during the normal course of operations, an endowment is usually intended to be invested such that the interest or gain on the investment is used for normal operations while the principal-the endowment-remains. For this reason, endowments are usually vast sums of money.