Church cash reserves: How much is enough or too much?
Here are some points to consider
There are many factors to consider when it comes to cash reserves for your congregation.
No two churches are exactly alike, so there’s no standard formula to recommend, but there are certain guidelines to think about.
Cash reserves are best viewed as emergency funds for unforeseen events or expenses which may confront a congregation. This is not the same as a renewal and replacement line item, which is for anticipated longer term needs such as replacing a roof or heat pumps, etc.
Be ready for emergencies
Whether a congregation owns a building or not, unforeseen emergencies can impact the ability of a church to meet expenses and pay staff salaries.
Why are cash reserves important to have?
- To ensure that expenses are paid (salaries, utilities) if there is a dip in giving.
- Some mortgage contracts may require churches to have funds on hand.
- To address exceptional needs that develop outside an existing budget.
If a congregation does not have a practice of having cash reserves, it may require some study and discussion to go this direction.
Some congregations have generous members with discretionary funds of their own who are willing to step up for any out of the ordinary expenses that may come around. This is a great gift, but these people may not always be around or able to step up in every time of need.
Other churches struggle to stay afloat financially, and it may be most important for these congregations to have a safety net.
Giving patterns are subject to change
Regardless of your current situation, realize that church membership and individuals’ giving patterns can change. Following are five ideas to consider and review every few years to determine if you do need cash reserves and how much may be adequate.
- Recognize that cash reserves are a way to protect a church from an unforeseen decline in giving or an unexpected financial challenge.
- Build cash reserves during good financial times.
- Include a cash reserve line in your budget.
- Establish specific guidelines and goals for a cash reserve fund. If it’s left too open-ended, it could create controversy if new ideas arise and people want to use this money for non-emergency needs.
- If you decide to set up a cash reserve fund, explain clearly to the congregation about the fund and why it’s being established.
The extreme responses to this topic are to do nothing and assume everything will be fine, or set too much aside (12 months or more of annual budget) that could be used for current ministry and mission needs.
Next step: Consider having a conversation about this topic with your key church leaders and go from there.