If I heard it once, I heard it a million times, save something for a rainy day. This idiom dates back as far as the 1500s. How did someone back in the 1500s know that flat roofs, which are so common on industrial buildings in California, leak? This story sounds personal because it is! In late 2015 the unusually high rainfall in our area revealed that the roof on our church leaked – a lot! We became what I dreaded, the church with buckets in the Worship Center to capture the rain. Gasp. In truth, we had been repairing the roof regularly and working with a vendor to determine the best replacement solution, but the rain beat us to the punch. Before this emergency, our church was navigating difficult transitions, and the financial strain prevented us from building sinking funds to replace the roof. Thankfully, because we saved for a rainy day, we could replace the roof with our reserves. But, rebuilding the cash reserve was difficult and caused us to rethink the critical questions about a cash reserve fund: why to save, how to save, and how much to save.
Why Save
In case you were wondering, having a savings account is not a lack of faith. The Bible calls it wisdom. The book of Proverbs contains plenty of advice on working hard and saving. One of my favorite examples is found in Proverbs 21:20 “There is treasure to be desired and oil in the dwelling of the wise; but a foolish man spendeth it up.” It’s wise because rainy days happen. If the issue isn’t a leaky roof, it’s a broken HVAC unit, a blown-out sound system, or an unforeseen ministry opportunity. And, if your church carries a mortgage, the covenant with the bank typically includes a debt coverage ratio. A reserve fund helps ensure the ratio is maintained. Creating and maintaining a reserve fund is a wise and thoughtful thing to do.
How To Save
When operating a church, it seems as though there is never a good time to save. It takes a tremendous amount of discipline to store up for the future when the present has so many needs. That is why it is best to build the reserves when the church is experiencing growth and offerings are up. But that is not always the case. Church attendance and giving can plateau or trend down. That is why a church must be intentional about saving and add a line item to the budget. Even a small amount at first is better than nothing. A $1,000 per month doesn’t sound like that much but $12,000 a year over a few years is significant. Hard times happen, and when they do, be flexible. You may need to skip a month or two or lower the amount. Just don’t give up until you fully fund the reserve.
How Much To Save
Once a church intentionally dedicates a portion of the offerings to building a reserve fund, the next step is to determine how much. In the world of personal finance, a person should have an emergency fund with savings that can carry 3-6 months’ worth of expenses. While a church needs a reserve fund, putting that much in is not realistic or strategic. Sarah Thompson at Capin Crouse recommends 40 to 80 days’ worth of expenses. She also cautions that a church with less than 20 days worth of expenses is in a dangerous position. Here’s what that looks like:
Actual expenses for a month = $115,000
Actual expenses per day (30 days) = $3,833
20-days worth of expenses = $76,667 (dangerous)
40-days worth of expenses = $153,333
80-days worth of expenses = $306,667
Your church will experience a rainy day emergency or an unexpected ministry opportunity. Your church may be in a growth period and have extra money to set aside now, or it needs to budget a little at a time. Regardless of the current situation, creating a reserve fund that can cover 20-40 days’ worth of expenses demonstrates care, discipline, planning, and wisdom for your church.
