Tuesday, March 19, 2013

A Long Term Plan to Continue Giving Back

Once I reach early financial independence, I have a plan to spend more time giving back, mostly in the form of time.  However, one idea that I have to give back will be through money with a scholarship.  A scholarship is a great way to help motivated students that wish to pursue college to avoid the pitfalls of student loans.  Plus it doesn't hurt that I get to name it whatever I want and you can rest assured it'll be named after me and my wife.  There's nothing wrong with a little self-promotion especially if it's while giving back.
Dividend growth investing is a perfect investment to fund a scholarship in perpetuity.  For just over $14,000 invested with a 3.5% yield, I could fund a $500 annual scholarship.  Since I'll be invested in dividend growth stocks, I can then use the excess cash from the dividends as they grow to purchase more stock for the foundation to then increase it to two scholarships or one larger one.  Investing with stable blue chip dividends growers such as KO, JNJ, PG, WMT, MCD and the like the income stream will be virtually guaranteed and will live on long after my wife and I are both gone.  

A few different thoughts have gone through my mind for the scholarship's goals/requirements.  Obviously academic achievement throughout high school is at the top of the list although I don't necessarily think it needs to be anyone that is in the top 5% or even 10% of their class because there's scholarships available for them.  Non-education related requirements will be on the list as well.  I've also gone back and forth on whether I'd be leaning more towards the science/engineering related fields of study or possibly education since my wife is a teacher.  If the funds are available I'll set up 2, but I think the science/engineering is closer to the top of the list because there is a seriously lack in this field and the advances that have been made in just my lifetime are truly amazing.  I'm also thinking that it will be geared towards middle or lower income families since they will be bombarded the most with student loans.

I haven't researched too much into setting up a foundation yet because I have a feeling it'll be best to have the full capital available if not already invested and then transfer the funds.  If anyone has any insights into getting this set up any help would be appreciated.

Got any other ideas for requirements or focus of the scholarship?  Do you have any pointers for setting up a scholarship in this fashion?

13 comments:

  1. Wow, what a great idea JC! That is an awesome idea and definitely something sustainable. I certainly will store the idea away and would definitely consider doing something like this myself!

    As far as setting things up, your best bet is to sit down with a CPA and an attorney, and find a specific target for your scholarship, such as a high school or college. Once you have your target, the funds set up, you can approach the school and I'm sure they would potentially help facilitate the marketing of the scholarship (thinking of guidance counselors in a high school for example).

    My parents actually were heavily involved in a small foundation doing something very similar (scholarships to high school students for the college of their choice).

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    1. W2R,

      I think it's a great way to give back and help prospective students out. And DGI just fits in perfectly with this because as you mentioned it's a very sustainable way to keep the scholarship alive for a very long time and also increase it to pay a higher amount or to increase the number of students we can help.

      Once I start getting closer to FI I'm going to have to look more into the best ways to go about setting this up. I think I'll be avoiding targeting a specific school, at least at this time, although it would be nice to have them do most of the marketing for it.

      I think just reaching out to whatever school district is nearby will get us enough applicants to sift through. And I'm sure they'd help with the marketing to their schools. I know when I was in high school we received a handbook that listed a bunch of scholarships that were available.

      Thanks for stopping by and feel free to get your own set up. If you happen to get it done before me pass along how the process went.

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  2. This is a good idea. I'll likely end up doing something like it myself, considering the major role that higher education has played in my life. However, like you, this is something I would do after achieving financial independence; I think of it being similar to a bucket list item.

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    1. DGM,

      Higher education is a great thing as long as you have a plan for it. Unfortunately too many students go in not having a clue what they are truly interested in or without any real motivation other than "everyone else was going to college" or "my parents wanted me to go".

      I wish they could have more career days in high school, at least I don't recall any at mine. While taking some intro engineering classes, they had some engineers come in after regular class hours to speak to us about what they really did. They had engineers from about 30 different engineering professions so it was very interesting. It'd be nice if they could do something like this for graduating high school students so they could get a better feel for what they could expect in their chosen field.

      Thanks for stopping by!

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    2. I confess that I went to college without a plan -- all my friends were going and my parents expected me to go, so it seemed like the natural thing to do. I started off with a general science curriculum in my freshman year, only to discover that I didn't like much of it. I also had no intention of taking a "pre-med" program like so many of my peers, very few of whom ended up getting into medical school. Fortunately, I was able to find a program in my sophomore year that appealed to me, and everything quickly fell into place after that. I was also fortunate to get some scholarships, which helped me graduate with only a small amount of student loans.

      That said, if I were to give back to higher education, it would likely be at the graduate school level, because that's where I really came into my own and built the foundation for my career. I also got a "full ride" in graduate school -- at an expensive place -- so I am more inclined to support graduate-level initiatives.

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  3. That is a very inspiring concept! I look forward to hearing more details as you approach financial independence and I'll certainly have to consider doing a similar scholarship program.

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    1. Net Worth Snowball,

      I think it's a great way to give back and it'd be nice to be on the other side of the interview table.

      Thanks for stopping by!

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  4. My wife and I want to do the same thing when we have the ability. I've actually looked into it but couldn't quite figure out how to make the whole thing work. I did notice that an easy way for us was if we wanted to set it up at the University we both graduated from. They basically take care of everything from screening applicants to awarding the funds. You just name the scholarship and give the selection criteria of your choosing. I imagine most universities have a program like this. The only reservations I had about this was wanting to have some input on the recipient selection so I wanted to look for other ways to set it up. I think it is a great way to give back.

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    1. Dan Mac,

      As of now I don't think I'm going to limit myself to one school, of course my wife and I went to different schools so it'd be hard to choose between them. Although it would be nice because I'm sure they'd do most everything, but like you I want to be involved in the decision process of who gets awarded the scholarship since I am fronting the cash for it and all.

      It seems like there's several people that are interested in this, maybe I'll have to figure out a way to start a scholarship foundation for all of us bloggers. ;)

      Thanks for stopping by!

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    2. JC, I think you might be on to a great idea. Perhaps in a few years this would be something the dividend community puts together. For example, ten individuals giving $5,000 worth of stock would be a tremendous start and would have a broader impact than going people going solo.

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    3. W2R,

      That would be a great way for us to all give back. I would personally prefer more control over the selection process so this would be one way to do that. We could all do a lot of good by combining our resources. That would be 3 $500 scholarships plus a cushion with a 3.5% yield. In the little bit of research that I've done thus far it seems like the easiest way is to go through a specific school, for no fee, or going through a non-profit/scholarship system for a management fee to handle the whole process. But going that route sounded like you lose the ability to be involved in the selection other than the initial setup of the criteria. This would be a great project for me when I do reach FI to help fill the time. I just don't want to have to sift through thousands of applications. The logistics of it right now are very muddied and seem overwhelming. I'd hate to lose out on potential scholarship offers to cover overhead. I'll keep you updated and just might have to come asking for contributions.

      Thanks for stopping by!

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  5. This is an awesome idea and one I have thought of myself! Instead of giving scholarships to high school seniors I would offer scholarships to graduating college students who have student debt. Basically it would be an incentive to do well in school, graduate, then pay down student loan debt.

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    1. Marvin,

      Hrmm...interesting twist. I hate all the easy loans that are available for students going to college. All it's done is drive up the cost of college and putting them further behind because they have to take out more loans to cover the expenses. It's a shame really. This could be one way to help combat the impact of student loan debt. I'm assuming it'd be a one time scholarship as opposed to a multi-year one.

      Thanks for stopping by!

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