What is the “Future Fund 50-50 method”?
The Future Fund 50-50 method is perhaps the most important (and the most fun!) part of the Future Fund. In short, it means that after subtracting 10% for our operational costs to run the Future Fund, 50% of the interest on your donation is transferred each year to the charity that you have chosen, and 50% is used to increase the value of your donation. The reason for adding to the value of the donation is: this way, the donations get a little bit bigger each year, every year — without end! So based on your one-time donation, the charity not only gets financial support every year, but it gets an ever-growing amount!
We can calculate how much support a charity would have received, if someone had invested 10 dollars 100 years ago for that charity using this 50-50 method. Without the 50-50 method (meaning that 100% of the interest is transferred to the charity every year), an invested amount of 10 dollars in 1920 would have resulted in 80 dollars dollars of support for the charity from 1920 to 2020.
With the 50-50 method, the support for the charity would have been even bigger. In the graph below you can see the math that shows this. The donated amount of $10 in 1920 would have resulted in $286 of support for a charity from 1920 to 2020, instead of $80 — more than 3 times more!
Source: Data build upon Robert R. Shiller, Stock Market Data Used in “Irrational Exuberance” Princeton University Press, 2000, 2005, 2015, updated data, available from the Department of Economics at Yale university. The Future Fund’s adaptations can be downloaded here.