Beryl Jantzi is a former pastor and now serves as the Everence director of stewardship education. For more information on examples of financial policies and practices congregations might consider adopting, contact email@example.com.
When it comes to having cash reserves for your congregation, there are many factors to consider. Since no two churches are exactly alike, there’s no standard formula to recommend, but there are certain guidelines to consider.
Cash reserves are best viewed as emergency funds for any unforeseen events or expenses a congregation may experience. This is not the same as a renewal and replacement line item, which is for expected longer-term needs, such as replacing a roof or heat pumps. Whether the congregation owns a building or not, there can still be unforeseen emergencies that impact the church’s ability to meet their expenses and pay for staff salaries.
Why are cash reserves important to have?
- To ensure that expenses are paid (salaries, utilities, etc.) if there is a dip in giving
- To comply with any contracts that may require churches to have funds on hand
- To address exceptional needs that develop outside of an existing budget
If the congregation does not keep a cash reserve, some study and discussion may be required before pursuing this option. Some congregations have generous members with discretionary funds of their own, who might be willing to step up for any out of the ordinary expenses that may arise. This is a great gift, but these persons may not always be around or able to step up in a time of need. Other churches struggle to keep staff afloat, financially, and it may be most important for these congregations to have a safety net.
Regardless of your current situation, realize that church membership and giving patterns of individuals can change. Consider and review the following five ideas 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 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 persons want to use this money for non-emergency needs.
- If you decide to set up a cash reserve fund, communicate a clear explanation to the congregation about the fund and why it’s being established.
Be sure to avoid an extreme response to building a cash reserve, such as doing nothing to prepare your congregation for emergencies , assuming everything will be fine, or setting too much aside —12 months or more of annual budget — which could be used for current ministry and mission needs.
Next step: Consider having a conversation about cash reserves with your key church leaders and proceed from there.
Ideas for this article are adapted from the Evangelical Council for Financial Accountability (ECFA) resources. For a free downloadable copy of the complete document, 9 Essentials of Church Cash Reserves, by Dan Busby, send a request to Beryl Jantzi, Everence director of stewardship education, at firstname.lastname@example.org.