How much cash should a church keep in reserve?

When it comes to personal finances, most experts agree that every person/family should have somewhere between 3 and 6 months worth of living expenses in an emergency fund. But what about a church?

Based on what I've heard and observed (both directly and by talking to CPAs who work with churches), I don't believe that too many churches follow that same advice when it comes to their own cash reserves. In fact, my non-verifiable opinion, based solely on what I have seen and heard, is that many churches operate on less than one month's worth of average giving.

In other words, let's say that Grace Church has an annual budget of $240,000. Assuming that they did not budget above what they believed they would actually receive in the course of the year, that means that they expect to average $20,000/month in giving. If they are like many of the churches I have seen and heard about, this means that they would have less than $20,000 in the bank at any given moment.

You know what that is, right? That's the church equivalent of living "paycheck to paycheck."

May I humbly suggest that this is not a wise approach when it comes to managing a church's finances? Just like an individual or family should have 3-6 months worth of living expenses in an emergency fund (separated from their normal checking account, by the way), so a church should have 3-6 months worth of average giving in an emergency fund - separate from their normal operating funds.

At our church, we have a number of different cash accounts. The two largest are our operating fund and our contingency fund. Our operating fund is our normal, monthly checking account. This is where weekly giving goes in, and this is where all bills are paid from. Separate from that, we have a contingency fund (which is what we call our emergency fund). In this fund, we keep three full months of average giving as nothing more than a cash reserve. This is here to protect us from any number of things (e.g. major, unforeseen expense; extended downturns in giving; loosing 2-3 weeks of giving due to a hurricane; etc.).

Why did we pick three months instead of six, you ask? Well, to me, it all comes down to size. We began maintaining a three month contingency fund back when our annual budget was around $120,000. Today, our current annual budget is approaching $400,000. Personally, I think we have about another $100,000 of budget growth before we would need to consider increasing our contingency fund to 4 months. It seems to me that, the larger a church is, the more it should consider adding to its cash reserves. For us, this is the schedule I would follow:

  • $0-$499,000 - 3 months
  • $500,000-$999,999 - 4 months
  • $1,000,000-$1,999,999 - 5 months
  • $2,000,000 and up - 6 months

Obviously, your specific circumstances might dictate a different schedule, but at least this will get you thinking. The reality is that the vast majority of churches will fall within that first tier, and will likely never have more than 3 months' worth of average giving in reserve . . . and that is okay.

Regardless, if your church does not have a sufficiently funded cash reserve, let me challenge you to talk with the leaders of your church about this need and to begin working towards that as soon as possible.

What do you think? Leave a comment below to share how your church handles this. Or, follow me on Facebook and leave a comment there.




Is your church structuring its pastoral compensation package in a way that truly blesses your pastor? Is your church doing all it can and should to financially provide for the pastors who keep watch over your souls?

The fact of the matter is that most churches have never given any thought to what a pastoral compensation package should look like, and much less to how they should structure it so that their pastor receives the maximum benefit.

Structuring Pastoral Compensation is written for church decision makers (Elders, Deacons, Trustees, Committee Members, etc.) to help them understand what should be included in their pastor's compensation and how to best implement the various pieces so that their pastor will be truly blessed.