How much cash does your church have on hand? I remember, as a young pastor right out of seminary, reading about a church that had hundreds of thousands of dollars in reserve. I remember thinking, “in reserve for what?” In my view, if a church had money in the bank, that was money that should have been used for missions and ministry. The Great Recession changed my view. In this edition of the Coach, entitled Why Cash Reserves Are Essential for a 21st Century Church, I discuss how much cash you should have on hand.
A recent Lifeway Research study found that fewer congregations have less than two months of cash reserves compared to a previous study in 2016. That is good news, but it does beg the question. How much cash should a church have in reserve? I’ll discuss that later, but the easy answer is enough to withstand a crisis much like Covid-19 forced churches through in the spring of 2020. Yet, few churches are at that point. Here is a quote from Scott McConnell, executive director of Lifeway Research,
“When hardships impact an organization, financial leaders carefully watch how much cash is on hand and how quickly they are spending it. Very rarely does cash stop coming in completely, though some churches experienced that for a few weeks in 2020. But hardships such as a financial recession can impact church receipts and force the use of cash reserves to get by. While improved, there are still too many churches with too little money in the bank given the uncertainties of 2023.”1.
How many weeks do you have in reserve? 31% of pastors didn’t know. If that is you, please stop reading and come back after you know. Of those that did know, the percentage of churches with less than 16 weeks of cash reserves has fallen from 50% in 2016 to 44%. 20% of pastors say their cash reserves are seven weeks or less which is down from 26% in 2016. 32% of pastors said they had between 16-51 weeks, and 24% had 52 weeks or more. 52% of African American pastors report less than eight weeks of cash reserves, while 35% of Hispanic pastors report the same amount. 17% of white pastors say they have less than eight weeks of cash reserves.
Why should your church have a healthy cash reserve? Covid-19 and the forced lockdowns should be exhibit A in the list of why you need a cash reserve. A look at the historical disruptions of this young 21st century, from recessions, wars, political upheaval, and an increasingly antagonistic world, shows the need to survive through a crisis. It is not if we will face another crisis but when. Will your church be ready?
How much cash reserve should you have? As with all things, the answer for each church will be different. I have, since The Great Recession, counseled that churches should have a minimum of at least three to six months in cash reserves. This range is the typical amount most banks are now requiring before they will consider loaning money to a church. Many banks, after loaning a church money, will require a set amount such as this to be held as long as the loan is outstanding.
I advise thinking about breaking your reserve into at least two funds. Beyond a cash reserve for any future crisis, I like to have a reserve fund for emergencies that arise. For instance, as a pastor, I once had an air conditioning unit blow out one weekday during the summer. While replacing it was only around $25K, we didn’t have that kind of money available. That experience taught me the importance of having a cash fund available for the inevitable crisis that always happens. For the next couple of years afterward, we built a 10% line in our operating budget to work toward building a cash reserve. I would recommend you think similarly.
How much is enough in reserve? The larger the church, the harder it is to accumulate large amounts of cash. I sent the Lifeway study to one of my long-time clients and friends, Alan Prass, the Executive Director of Christ Church outside of Saint Louis. Alan wrote back, “We have $400,000 cash on hand. We’re one of those churches that have less than seven weeks of cash reserves. I’m amazed that they say almost 25% of churches have more than a year’s worth of cash reserves on hand. Where’s the balance of having enough cash reserves and doing ministry to grow the kingdom? I can’t imagine what Christ Church would look like if we decided that saving money was our primary mission. We’d have to have $3.8M in cash reserves. Actually, if that were our primary mission, I predict that we’d be half our size and would only need $2M in reserves.”
Alan underscores my point that the answer of how much you need in reserve depends on your situation. While I would love to see Christ Church have more in reserve, they do have a healthy enough reserve to see them through. And I agree and love Alan’s point that saving money isn’t a church’s mission. The key is to arrive at a cash position that allows you to continue your current ministry as well as secure your future. So…
The goal of your cash reserve is to have enough money that no crisis keeps you from doing the work of your church. Do you currently have a reserve of cash that will do this? If not, it is time to work towards that goal.
As I say, the church that survives into the future is the church that plans for the future today. For the 21st-century church, a cash reserve is essential.
Mark Brooks – The Stewardship Coach
Missions and Ministry Moment (aka Offering Talk) – To simplify and better meet your needs, I have moved away from posting weekly talks to the Stewardship Coach/Stewardship Journal newsletter. Instead, I will be providing links to all my offering talks.