Dear 100 Hour Board,
Let's say I had tons of money (I don't) and wanted to set up a scholarship for a high school. I understand that some scholarships are set up with some kind of self-renewing funds. How does that work? Do they just have a ton deposited in the bank so they get enough interest every year to cover things? Or do they do fancy stuff like invest in mutual funds or something?
How much money would you need saved up (or invested or whatever) to offer at least a $1,000 scholarship every year and not ever deplete the account?
-Hopefully I will be rich and need to know this like 20 years from now
Here's Wikipedia's basic explanation of how financial endowments work. You may hear about not just a university's overall "endowment" but also things like "Professor So-and-so, the Endowed Chair of X." There's also a brief blurb on endowed scholarships.
The gist of it, explained in this quote from the above article, is that:
[An] endowment is structured so that the principal amount is kept intact, while the investment income is available for use, or part of the principal is released each year, which allows for their donation to have an impact over a longer period than if it were spent all at once.
I'd personally be pretty shocked (especially given the terms 'investment' v 'principle') as used above if most endowment funds were merely banked, as that's just an inefficient way to store money that's intended for long-term rather than short-term stuff. I'm guessing that many organizations large enough to have self-perpetuating endowment funds are also large enough to either have their own financial managers or to have at least hired someone to do that, so investment should be well-within their capabilities.
With regards to a $1000 annual scholarship, how much money you'd need could vary, but according to this source, $20,000-$25,000 is probably the ballpark you're looking at. Don't know if BYU has a specific amount, but if you wanted to run the scholarship through them rather than administer it yourself, you could contact LDS Philanthropies and ask them for BYU-specific details, if that's your alma mater.
(As a side note, that's in the same area as the "4% rule," which you may hear about in relation to retirement savings/expenditures.)