Definition
A stipend is a fixed amount of money paid regularly, often on a monthly or weekly basis, to cover expenses. It is typically provided to interns, apprentices, or trainees to support them during a period of training or education. Unlike a salary, a stipend is usually not tied to job performance or hours worked.
Key Takeaways
- A stipend is a predetermined amount of money that’s paid regularly to individuals, typically with the aim of helping to cover their basic living expenses.
- Often granted to those who can’t work because they’re engaged in a particular endeavor, stipends are common among graduate students, interns, or trainees.
- Stipends aren’t considered salaries or wages, so while they are taxable, they don’t qualify one for benefits such as unemployment or workers’ compensation.
Importance
A stipend plays a crucial role in finance for several reasons.
Primarily, it is a predetermined amount of money paid to individuals, such as interns, apprentices, or scholarship recipients, to help cover their living expenses while they engage in work or study that is often unpaid or low paid.
Unlike a typical salary, a stipend is not dependent on the hours worked, but an agreed sum to support the beneficiary during their work or research period.
This financial tool is particularly important as it can facilitate learning and professional development opportunities for individuals who might not have been able to pursue such endeavors without monetary support.
Hence, stipends foster equity, inclusivity, and diversity in various professional fields.
Explanation
A stipend is a predetermined amount of money that is provided periodically to help cover living or work-related expenses. The purpose of a stipend is often to relieve someone of their financial burden while they are engaged in work that is typically unpaid or low-paying but generally beneficial or worthwhile.
This often applies to positions like internships, apprenticeships, volunteers, or trainees. By offering a stipend, organizations or employers can attract individuals who may not be able to afford to work without some financial assistance.
Stipends are notably used in academic settings, provided to graduate students or researchers who contribute their time and skills to the institution. They serve the dual purpose of facilitating the individual’s professional development while also advancing the institution’s research and academic goals.
Similarly, in nonprofit organizations, stipends are often used to support volunteers who are committed to the cause but need some financial help to continue their work. In sum, the general purpose of a stipend is to provide a level of financial support that allows individuals to engage in work that may not typically provide a sufficient income.
Examples of Stipend
Academic Setting: Universities often offer stipends to graduate students who are conducting research or teaching classes. The stipend serves as a financial support system that allows the student to focus on their academics more than a job outside the university.
Internships: Some companies or organizations offer a stipend to their interns. It’s a predetermined amount of money that the intern will receive to help cover living costs, transportation, or food.
Public Office: In many government roles, officials receive a stipend. For example, city council members can receive stipends to compensate them for their time and any costs related to their duties.
FAQs About Stipend
What is a stipend?
A stipend is a predetermined amount of money that’s paid to an individual, often a student or intern, in return for services rendered, such as to help cover living expenses and other costs. It’s not a salary or wage, but still considered a form of compensation.
How is a stipend different from a salary?
A stipend is generally a fixed amount paid to an individual for the purpose of helping cover costs, and it doesn’t typically depend on the hours worked like a salary or wage. Stipends are used to compensate individuals for work they’d otherwise do unpaid, like internships or some volunteer positions. A salary, on the other hand, is usually a fixed sum of money paid to an employee for performing specific job tasks.
Are stipends taxable?
It depends on the circumstances. In many cases, stipends are considered taxable income. However, taxation depends on factors such as the nature of the work performed, whether or not it’s linked to an education context and more. It’s advised to consult with a tax professional to understand the tax liabilities better.
Can a stipend be negotiated?
Stipends are typically a fixed amount set by the organization offering it. These amounts are usually non-negotiable as they’re often budgeted for in advance. However, it may sometimes be possible to negotiate, but this is generally the exception, not the rule.
Who typically receives a stipend?
Stipends are commonly received by interns, apprentices, graduate students, and volunteers who are performing work, typically for a non-profit, educational institution, or similar organizations.
Related Entrepreneurship Terms
- Grant
- Scholarship
- Fellowship
- Allowance
- Salary
Sources for More Information
- Investopedia: A comprehensive website that provides information on various finance terms including ‘Stipend’
- The Balance: A personal finance website that provides expertly crafted content including detailed explanation on financial terms like ‘Stipend’
- NerdWallet: An American personal finance company that offers a variety of financial tools and advice, including an informational blog about various finance terms
- Money Under 30: An online site providing straightforward advice on complex financial topics including ‘Stipend’
