How can this be enough to fund a scholarship in perpetuity?
The Trinity study looked at 'safe' withdrawal rates from retirement portfolios. They found it was safe to withdraw 4% of a portfolio consisting of stocks and bonds. I cannot immediately find exactly what specific investment allocations they used, but note that they found a portfolio consisting largely of stocks would allow for the withdrawal of 3% - 4% and still keep up with inflation. In this case, if you are able to fund $30,000, the study claims it would be safe to withdraw $900 - $1200 a year (that is, pay out as scholarships) while allowing the scholarship to grow sufficiently to cover inflation, and that this should work in perpetuity. My guess is that they invest such scholarship funds in a fairly aggressive portfolio. Most likely, they choose something along these lines: 70 - 80% stocks and 20 - 30% bonds. This is probably more risky than you'd want to take, but should give higher returns than a more conservative portfolio of perhaps 50 - 60% stocks, 40 - 50% bonds, over the long term. Just a regular, interest-bearing savings account isn't going to be enough. They almost never even keep up with inflation. Yes, if the stock market or the bond market takes a hit, the investment will suffer. But over the long term, it should more than recover the lost capital. Such scholarships care far more about the very long term and can weather a few years of bad returns. This is roughly similar to retirement planning. If you expect to be retired for, say, 10 years, you won't worry too much about pulling out your retirement funds. But it's quite possible to retire early (say, at 40) and plan for an infinite retirement. You just need a lot more money to do so. $3 million, invested appropriately, should allow you to pull out approximately $90,000 a year (adjusted upward for inflation) forever. I leave the specifics of how to come up with $3 million as an exercise for the reader. :) As an aside, there's a Memorial and Traffic Safety Fund which (kindly and gently) solicited a $10,000 donation after my wife was killed in a motor vehicle accident. That would have provided annual donations in her name, in perpetuity. This shows you don't need $30,000 to set up a scholarship or a fund. I chose to go another way, but it was an option I seriously considered. Edit: The Trinity study actually only looked at a 30 year withdrawal period. So long as the investment wasn't exhausted within 30 years, it was considered a success. The Trinity study has also been criticised when it comes to retirement. Nevertheless, there's some withdrawal rate at which point your investment is expected to last forever. It just may be slightly smaller than 3-4% per year. Some historical and mathematical insights as a complement to existing answers.  History. I found it astonishing that already in Ancient Roman they investigated the issue of perpetuity of 30'000 (almost). Columella writes in De re rustica (3, 3, 7–11.) in 1-st century AD about a perpetuity of 32480 sesterces principal under 6% p.a. resulting in 1950 sesterces annual payment. And  if  the  husbandman  would  enter  this  amount  as  a  debt  against his vineyards just as a moneylender does with a debtor,   so that the owner may realize the aforementioned six per cent. interest on that total as a perpetual annuity,  he  should  take  in  1950 sesterces every  year.   By  this  reckoning  the return on seven iugerum, even according to the opinion of Graecinus, exceeds the interest on 32'480 sesterces. Math. If we fix a scholarship at 1'000 a year, then it's clear that it could be paid out infinitely if we could achieve 3.33% p.a. on it.  On the other side, with 0% we'll spend out the endowment in 30 years. Thus, having the interest rate between 0% and 3.33% p.a. we could vary the life of endowment between 30 years and infinity. Just a few numbers in between: under 1%, it would be ~36 years, under 2% ~46 years, under 3% ~78 years (however, 1000$ in 78 years could be less than 10$ today). Conclusion: to keep it perpetual either the fund's yield must be at the level of scholarship, or re-adjust the amount of scholarship depending on fund achievement, or redefine the notion of perpetuity (like 50 years is approximately infinite for our purpose). "What's the value of the scholarship, and is it administered by itself or by the university?  If by itself, the financial return discussed above drives.  If by the university, they create the tuition, so it gets more interesting.   If this is something that is administered and backstopped by the university, then keep in mind that while it may be named the ""John Doe Memorial Scholarship"" with $30000 in it's account under the endowment, the university overall is likely to cut some number of students' tuition in financial aid packages anyway.  Let's say they substitute a generic tuition adjustment in past years with this happens-to-be-named ""John Doe Memorial Scholarship"" moving forward: the university can do this as long as they are not constrained in pricing power by laws and financial aid customs.  There's the finance answer, and there's the fact that a university can create a ""coupon"" indefinitely (Similar in concept to the price discrimination where Proctor and Gamble can launch a new flavor of Tide at a high price to maintain the market position, and flood marketing channels with coupons) Also the university might find it to be an inexpensive benefit to the faculty to create a ceremony around a valued, deceased professor; collecting funds from other professors or staff to partially pay for it at finance price or even a slight loss."
The principle of demand-supply law will not work if spoofing (or layering, fake order) is implemented. However, spoofing stocks is an illegal criminal practice  monitored by SEC. In stock market, aggressive buyer are willing to pay for a higher ask price pushing the price higher even if ask size is considerably larger than bid size, especially when high growth potential with time is expected. Larger bids may attract more buyers, further perpetuating a price increase (positive pile-on effect). Aggressive sellers are willing to accept a lower bid price pushing the price lower even if ask size is considerably smaller than bid size, when a negative situation is expected. Larger asks may attract more sellers, further perpetuating a price fall (negative pile-on effect).  Moreover, seller and buyers considers not only price but also size of shares in their decision-making process, along with marker order and/or limit order. Unlike limit order, market order is not recorded in bid/ask size. Market order, but not limit order, immediately affects the price direction. Thus, ask/bid sizes alone do not give enough information on price direction. If stocks are being sold continuously at the bid price, this could be the beginning of a downward trend; if stocks are being sold continuously at the ask price, this could be the beginning of a upward trend.  This is because ask price is always higher than bid price. In all the cases, both buyers and sellers hope to make a profit in a long-term and short-term view "It reminds me of the Efficient Market Hypothesis, except that just states in its weakest form that the current market price accounts for all information embedded in previous market prices. In other words, people buying today at 42 know it was selling for 40 yesterday, and the patterns and such. To say that stock is memoryless strikes me as not quite right -- to the extent that stocks are valued based on earnings, much of what we infer about future earnings relies on past and present earnings. One obvious counterexample to this ""memoryless"" claim is bankruptcy. If a stock files bankruptcy, and there isn't enough money to pay senior debt, your shares are worth 0 in perpetuity." "Why don't they raise wages then? Adjust the prices for labor costs and call it a day? Working fast food you're not exactly building valuable workplace skills and your life is more or less on hold, they may as well pay you enough to exist. There is also the question of making sure it's relatively isolated to the area. You can live off working at McDonalds for $10/hr in someplace like Missouri where the COL is super low but as soon as you go someplace like the city that becomes starvation wages.              I think companies like the leverage of starvation wages though, it creates a situation where the worker doesn't have anywhere to go and no time to work upward creating a perpetual cycle of working for low wages and being unable to mobilize. I think companies like this because it may reduce turnover. Raising the wages a little more gives people room to develop skills and bounce. At most of my jobs the managers openly talked about not promoting people in school ""because they were just gonna leave anyways"" which about sums up how I feel about it." "I agree with @Pete that you may be well-advised to pay off your loans first and go from there.  Even though you may not be ""required"" to make payments on your own loan based on your income, that debt will play a large factor in your borrowing ability until it is gone, which hinders your ability to move toward home ownership.   If you are in a fortunate enough position to totally pay off both your loan and hers from cash on hand then you should.  It would still leave you with more than $112,000 and no debt, which is a big priority and advantage for a young couple. Mind you, this doesn't keep you from starting an investment plan with some portion of the remaining funds (the advice to keep six months' income in the bank is very wise) through perhaps a mutual fund if you don't want to directly manage the investments yourself.  The advantage of mutual funds is the ability to choose the level of risk you're willing to take and let professionals manage how to achieve your goals for you.  You can always make adjustments to your funds as your circumstances change. Again, I'd emphasize ridding yourself of the student loan debt as the first move, then looking at how to invest the remainder." OK 40k vs 10k per year.   That's 120k in loans difference.  At 6% interest over 20 years that's roughly 200k (10k) a year to pay for school.  Do you really think most people will get 10k a year extra because they when to Berkeley instead of Iowa state? Thank you fgunthar. I was not aware of ILWs, but I agree - this is also the closest thing I've found.   As for starting a fund, I'm unfortunately nowhere near that point. But, my curiosity seems to inevitably lead me to obscure areas like ILWs. Make sure that when you have the loan you still contribute enough to get the company match. For example:  An inability to maximize the match might need to be figured into the opportunity cost of the loan. Some companies will suspend your contributions for a specific number of months for a hardship withdraw.  Make sure you understand where the money comes from for the loan. Can you count the money that the company matched but you are not vested with, when determining the maximum amount of the loan?  If the money is in what is now a closed fund can you replenish the funds back into that fund if use it to fund the loan? Know what the repayment time period is of the loan. "&gt;If there aren't enough seats in the classrooms, some people will be left without the college education they want, no matter how the financing is provided.  I'll grant you this, but we can always produce more classrooms.  Let's use your loan example. If I take out a college loan it represents the value of some other asset, and the lender's belief that I will later be able to compensate the lender for giving up that asset.  Just as we could price the value of the hunter's demise, we can price the value of a student's failure or success. If the student has delivered in the past (good grades, high productivity), then we can reliably price the cost of her college education.   In a very real way, she has ""created"" her own seat in the classroom right now by promising to pay for it in the future. And we can rely on this promise on the basis of her past performance. I won't get into whether this is reliable or even desirable.  Just as we priced the value of the hunter's non-performance/demise, we can price the student's non-performance/default. We can build this into the cost of the loan, or spread the cost out among all the other loans we give."