Part 2: Cash Management
Part 1 of this series discussed the need to prepare your church for the unexpected and build cash reserves. This article shares important considerations when looking for ways to grow your church cash reserves.
Steward the Gifts
It may seem obvious for church leaders, but the most important thing to consider when investing church money is being a wise steward of the finances your church members have given. Hard-earned money is given as tithes and offerings, and church leadership has responsibility for these funds.
Identify Investment Goals
Before choosing an investment option or financial institution to partner with, you should first ask yourself (and your church board) several questions to better understand your needs and goals. This will greatly help when selecting where to invest your funds.
Here is a list of questions to get you started:
+ Does the church have an emergency fund? If not, you should build enough cash reserves to cover an adequate number of months’ worth of expenses.
+ Do you want to earn more on church cash reserves than traditional options offer? Assuming the church has cash reserves, as mentioned in Part 1 of this series consider placing funds in an interest-bearing investment with adequate liquidity, such as AGFinancial Demand Certificates.
+ How quickly might you need the invested cash? Understand your need for liquidity before landing on an investment option. If liquidity is not a major factor, you can invest in term investments (maturing at a designated time), and stagger the invested amounts using the laddering strategy. Laddering is an investment approach that allows you to invest portions of your investments in such a way that investments mature at different times. Think of each individual investment as a rung on a ladder. As each rung on the ladder approaches maturity, you have the option to consider the current interest rates and whether to reinvest. In this way, laddering can provide predictable access to funds while matching optimal yields with timing of cash needs.
+ Are you looking to expand church facilities in the next 2 years? When considering ways to finance a church construction or remodel project, the strongest source of funds is cash on hand. Create a goal to raise a specific amount and work diligently to meet that goal. If additional funds are needed for the project, consider a generosity campaign and/or a church loan (link to loans landing page).
+ Is it important for church leadership to partner with a faith-based financial institution? Many leaders are not comfortable investing church cash with financial groups whose values are not aligned with the church’s values.
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