Starting a Scholarship Fund

I help run a scholarship program for the Arts Council I sit on, we give away between $600-$6000 scholarships per year depending on how much we have from the interest in the account. I would suggest getting a consultant to help you set up the account. It's easy enough to maintain it once it's established. The following are very high level steps. Again, find a consultant who's done this before. If you don't do it properly you can be audited.

1. Start a non-profit corporation, 401 (c) (3). Then get an IRS EIN number so people/the corporation can make tax deductible contributions.
2. Find a company who will manage the account. There are other non-profits that you can pool your money with who will act as custodian. OR open a CD at a bank OR find a way to invest the money.
3. Fund the account.
4. Determine if you'll fundraise annually and award based on what is raised in that year OR if people will be donating funds in perpetuity and you will use any interest which rolls off the investment to award the scholarships.
- If you decide to go in perpetuity, realize that it makes the most sense, but will take a significant amount of money in principle to have enough money thrown off every year to make a scholarship worthwhile to award. For example you have 50k invested and it throws off 2% (typical) you will have a scholarship of $1000 per year.
5. Set up the method in which scholarships are awarded: needs based (again, can get you into trouble with the IRS as you have to prove the 'need' with income checks, etc) merit based, citizenship/attendance, potential, etc.
6. Enjoy the goose bumps when a student receives the award and they truly deserve it :)

The company I work for has a scholarship fund. Here's some of the basics.
They set up a separate 401(c) corporation with the IRS.
Each year they have a dinner to raise funds, at the dinner the awards are presented.
The company manages the funds and fundraising themselves, but has a board of trustees that overseas everything.
They have a formal application and essay question for applying, ours is merrit based.
They have an outside group, review the applications and select the winners.

This is strictly off the top of my head.

1. I would begin by figuring out where the money for the fund is coming from.
2. Determine how much money will be distributed.
3. What criterior is going to be used to qualify for the scholarship.
4. Decide who will pick the qualifying students.
5. Create an application form for possible recipients to fill out.
6. Set a deadline for the applications to be received.
7. Select scholarship recipients.
8. Notify recipients.
9. Provide recipients with their award.
10. You may or may not want a scholarship dinner or program or something like that.

I'm certain there are other things but these are the things that come to mind off the top of my head.

I have been head over heels trying to save money lately, so I have been listening to Dave Ramsey lately. It looks like daveramsey.com has lots of good advice on it or you could even email him and ask. He seems to know whats out there and helps you do it smartly.