Endowment is money or property given to an institution for a specific purpose. As explained by the National Council of Nonprofits, endowments may generally be described as the total of a non-profit institution’s investable assets (usually cash accounts that are invested in equities or bonds, or other investment vehicles), also known as its principal or corpus, which is invested so that the principal grows over time as a result of income earned from interest on the underlying invested funds. In other words, the principal isn't spent -- instead, a portion of the income earned from the principal is used for the benefit of the institution and the remainder is added to the principal for growth.
Endowments are commonly used by large institutions, such as universities and hospitals, but may also play a role in any charitable non-profit institution’s financial management and/or revenue strategy.
[Last updated in July of 2021 by the Wex Definitions Team]