Published Jul 25, 2023
In March 2023, Baptist Press reported that post pandemic churches are more likely to have more than 15 weeks of cash reserves as of 2022 than they were in 2016 according to a Lifeway Research study. This is great news for the financial health of our churches. It is also a very interesting result given the impact that the COVID 19 pandemic had on churches. During the past three years, I’ve had many conversations with our California Southern Baptist pastors and found a few commonalities amongst their pandemic experiences. Firstly, while many churches experienced a decline in attendance (often a dramatic one), tithing was not proportionally impacted in a negative way. It seems that the faithful givers stayed committed to their church and continued to tithe. Another commonality was that federal programs (such as the Payroll Protection Program and the Employee Retention Credit) in many cases not only covered the deficit in tithing income but those programs helped churches grow their cash reserves.
Why Your Church Should Have Reserves
It is important for church leaders to understand why it is so important to have reserves not only for their own sakes, to effectively communicate that need with your church members. When hard times hit, reserves allow you to be proactive rather than reactive. In other words, reserves give you the benefit of time to think things through rather than having to make drastic decisions under distress. If you have adequate reserves you don’t have to immediately cut staff, projects, services, etc. You can analyze the situation and come up with a strategy to address your current financial challenges.
Another benefit of adequate reserves is the ability to cover non-recurring expenses. These might include a great ministry opportunity that is outside of your annual budget, or when an unexpected repair comes along, you are prepared to take care of it. That level of financial coverage alleviates a great deal of stress on ministry leaders, whose lives are already stressful enough!
How to Build Reserves
There are a few ways you can build reserves:
The first thing to remember is it takes time. Don’t rush the process and don’t feel overwhelmed or discouraged if you are currently well under your goal or even if you have no reserves at all. Slow and steady is the name of the game.
- One way you can begin building reserves is to budget a lower amount of revenue next year than what you can reliably expect. This may mean budgeting five or ten percent less revenue (tithes) and what you’ll end up with is a modest surplus at the end of the year (all else being equal). It may take a few years of doing this to end up where you need to be and that’s ok.
- Similarly, you could add a line item to your budget for reserves. Aside from now having adequate reserves, another benefit is once you have met your goal, you are now accustomed to living under your means and next year you’ll have extra room in your budget for ministry, missions, and more.
- Lastly and less common is utilizing one-time events such as a portion of a large undesignated gift or grant, or like so many churches did if a program comes along like the Payroll Protection Program.
How Much is Enough?
This is probably the question you’ve been asking the whole time you’ve been reading this. Common wisdom for churches is to have three to six months of expenses in reserves. This gives you the stability and benefits discussed above without giving your congregation the feeling that you are hoarding resources that could be used for kingdom work. You may notice that some non-church organizations such as conventions, mission boards, and foundations have greater than six months in reserves. There are a few reasons why this is healthy and appropriate. These kinds of organizations have a much less direct impact on what gifts they will receive than does a local church. Giving trends at the state or national level lag by quite some time, and they need the stability and flexibility that adequate reserves provide. Another reason is that these organizations often rely on investment income to offset their budgets. In order to do this in a sustainable matter they need more reserves on hand to produce enough income without having to pull from principle, especially in a year when the market is down.
It’s never too late to start making strides toward building up reserves. Being intentional in your strategy and being forthright with your congregation will be half the battle. After that, you should celebrate markers of success throughout your saving endeavors, knowing you are securing peace of mind in the present and greater security for tomorrow.
