Restricted Fund

DEFINITION of 'Restricted Fund'

A reserve of money that can only be used for specific purposes. Restricted funds provide reassurance to donors that their contributions will be used in a manner they have chosen. When a donor gives money to a nonprofit organization, he or she may specify whether the gift is unrestricted and can be used for any purpose the organization sees fit, temporarily restricted to be used for a certain purpose, or permanently restricted so that the donation acts as principal on which interest can be earned (and only the interest is to be spent).

BREAKING DOWN 'Restricted Fund'

Most often endowments are considered restricted funds.Their principal usually cannot be spent at all, and only a specified percent of the interest they earn can be spent per year. Furthermore, there are restrictions on how the interest can be spent - it may be used only to fund scholarships and professorships, for example.

RELATED TERMS
  1. Endowment

    A financial asset donation made to a non-profit group or institution ...
  2. Accelerative Endowment

    An option in a whole life insurance policy to use accumulated ...
  3. Principal

    1. The amount borrowed or the amount still owed on a loan, separate ...
  4. Donor Advised Fund

    A private fund administered by a third party and created for ...
  5. Philanthropy

    Charitable giving to human causes on a large scale. Philanthropy ...
  6. Institutional Fund

    A fund that targets high value investors with low management ...
Related Articles
  1. Home & Auto

    Using Life Insurance To Make Charitable Donations

    Your life insurance policy can be a great tool for charitable giving. Find out how.
  2. Taxes

    Deducting Your Donations

    Generosity may be its own reward, but some charitable giving also provides personal tax benefits.
  3. Fundamental Analysis

    How To Invest Like An Endowment

    Historically, Ivy League endowments have had a successful investment strategy. Will it work for you?
  4. Personal Finance

    7 Signs Of A Charitable Disaster Scam

    Make sure you know where your donations are going, and where they can be most effective.
  5. Professionals

    A Career In Endowment Management

    The pay may not be as competitive as Wall Street, but the work environment, opportunity and knowing your helping out an educational facility makes this an attractive career.
  6. Retirement

    Non-Cash Contribution Rules Could Cut Returns

    Higher standards for certain contributions could mean smaller deductions for you.
  7. Investing

    3 Healthy Financial Habits for 2016

    ”Winning” investors don't just set it and forget it. They consistently take steps to adapt their investment plan in the face of changing markets.
  8. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  9. Retirement

    Smart Ways to Tap Your Retirement Portfolio

    A rundown of strategies, from what to liquidate first to how much to withdraw, along with their tax consquences.
  10. Mutual Funds & ETFs

    The ABCs of Mutual Fund Classes

    There are three main mutual fund classes, and each charges fees in a different way.
RELATED FAQS
  1. How do university endowments work?

    Endowments represent money or other financial assets that are donated to universities or colleges. The sole intention of ... Read Full Answer >>
  2. Does mutual fund manager tenure matter?

    Mutual fund investors have numerous items to consider when selecting a fund, including investment style, sector focus, operating ... Read Full Answer >>
  3. Why do financial advisors dislike target-date funds?

    Financial advisors dislike target-date funds because these funds tend to charge high fees and have limited histories. It ... Read Full Answer >>
  4. What licenses does a hedge fund manager need to have?

    A hedge fund manager does not necessarily need any specific license to operate a fund, but depending on the type of investments ... Read Full Answer >>
  5. Can mutual funds invest in hedge funds?

    Mutual funds are legally allowed to invest in hedge funds. However, hedge funds and mutual funds have striking differences ... Read Full Answer >>
  6. When are mutual funds considered a bad investment?

    Mutual funds are considered a bad investment when investors consider certain negative factors to be important, such as high ... Read Full Answer >>
Hot Definitions
  1. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  2. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  3. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  4. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  5. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center