Your Church Emergency Fund

Show Notes

• COVID caused a dramatic drop in church attendance and giving. If there was a silver lining, it was that the pandemic removed any doubt that churches need to have cash reserves. But the question remains, “How much?”
• The Evangelical Council for Financial Accountability covers this in a great article, “Church Cash Reserves: How Much Is Enough?”
• Let’s start with why a church emergency fund is so important. Just like with your personal finances, churches need a cushion to ensure that routine expenses are paid on time. Without it, they run the risk of getting hit with late fees.
• If there’s a mortgage on the property, churches need at least a few months’ worth of payments stored up to avoid foreclosure if giving suddenly drops. Why would that happen? Well, just one example - it’s a sad fact that churches split, and if half the members leave, a church could soon be facing financial calamity.
• Also, no one wants to have to take a special offering to replace a worn out heating or cooling unit. Or have to start at zero if the church decides to launch a new ministry. So there are plenty of reasons why a cash reserve is essential for a church.
• The same scriptures that apply to individuals apply to churches. Proverbs 6, “Go to the ant, you sluggard; consider its ways and be wise! It has no commander, no overseer or ruler, yet it stores its provisions in summer and gathers its food at harvest." Also Proverbs 21, “The wise store up choice food and olive oil, but fools gulp theirs down.”
• Let’s say a church has a healthy cash reserve. The work doesn’t stop there. Planning and wise management of that fund are necessary because there will always be pressures within the church about how it should be used.
• Should some of it go toward paying down debt early? Or to be more generous with the staff? Or to start new programs? This leads us back to the original question: How much is enough for a church’s cash reserve? And just how do they come up with that number?
• Here there are two very different schools of thought. One says the church should have almost nothing in reserve, trusting in God, instead. The other says a church should have an entire year or more’s worth of operating expenses in the bank.
• The correct answer is likely somewhere in the middle, and each church, with its leadership, has to decide what’s best.
• What guides that process?

  • Members need to understand that having a cash reserve is simply the faithful administration of God’s resources. This honors God, and the church has to make it a priority, because it represents Christ in the world.
  • Next, it’s important to build up the reserve during the good times, especially when the church is growing. It should be part of the budget process - building a cash reserve as giving increases.
    A church can do that in two ways. One is to budget next year’s revenue at, for example, 90% of this year’s, or by simply putting a line in the budget for “Additions to Cash Reserves.”
  • Whichever way a church does this, it’s important to separate the reserve money from designated funds. In the event of a revenue shortfall, a church shouldn’t be tempted to pay the mortgage with money specifically mandated for something else.
  • And speaking of the mortgage, it’s wise to keep mortgage reserves above what the lender might require.
  • It’s also important to be specific with cash reserve goals - things like servicing debt, capital replacement and ministry expansion.
  • Also, for any of this to work, leadership needs to communicate the importance of having cash reserves to the congregation. It doesn’t show a lack of faith - it's simply good stewardship. Properly communicating clear, specific goals and the progress made toward them might even inspire more faithful giving.
  • And finally, leadership can challenge the congregation along the way to meeting a church’s cash reserve goals. Malachi 3:10 comes to mind. It reads, “Bring the full tithe into the storehouse, that there may be food in my house. And thereby put me to the test, says the Lord of hosts, if I will not open the windows of heaven for you and pour down for you a blessing until there is no more need.”

• What should you do with $57,000 in an old 401k if you are 58, $38,000 is remaining on your mortgage, and you and your husband are employed full time?
• Should you buy or rent if you are a 73 year old widow who recently moved to Tampa and are having second thoughts about having purchased a villa that is currently undergoing renovations?
• What are the benefits and potential costs of establishing a Revocable Living Trust and Medicaid Asset Protection Trust if you and your wife are recently retired and needing to update your estate plan?
• Should you pay off your mortgage if it would use most of your emergency reserves but then plan to replenish your savings?

• The Evangelical Council for Financial Accountability: “Church Cash Reserves: How Much Is Enough?”

Remember, you can call in to ask your questions most days at (800) 525-7000 or visit our website at FaithFi.com where you can join the FaithFi Community, and download the free FaithFi app.