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Prepared for Rainy Days: How to Build a Church Emergency Fund

Church Finance Basics

In honor of National Preparedness Month, we are kicking off a three-part series to help churches and ministries learn how to be better prepared. This first part focuses on emergency savings.

"In all matters we should hope and pray for the best; nevertheless, we should be prepared for the worst." - Martin Luther

An emergency fund can help sustain your ministry during low giving times or a financial crisis. In addition, lenders often require churches to maintain a certain amount in reserve. Having a healthy reserve may help you qualify for a church loan when you need it.

Build your fund with these proven tips (P.S. you can also use these same principles to build your family's emergency savings):

Put it in the budget.

Although the idea of setting aside resources for hard times dates back to Joseph, it's a lesson many churches learn the hard way. The simplest, most effective way to build an emergency savings fund is to put it in the budget by allocating a portion of monthly income (undesignated tithes and offerings) as savings.

Dispose of unused assets.

If your church owns land, buildings, or vehicles which are no longer used or needed, consider selling those assets and using all or a portion of the funds to build church savings.

Cut small expenses.

Adjust the thermostat a degree or two. Ask volunteers to bring donuts/coffee instead of offering them free. Shop for less expensive service providers or cut the service altogether. For example, consider using volunteers for church cleaning and groundskeeping rather than a lawn care provider or janitorial service. By reducing or removing several small expenses, you can greatly increase your overall savings.

Aim for 3-6 months of expenses.

Although there's no single right answer for how much a church needs to maintain in reserve, this is a useful guideline. It may be that smaller churches should aim for a larger cushion because they may have fewer givers to help in a financial crisis. Larger churches may be able to get by with a smaller cushion if they have a large number of givers who can help maintain the stability of church income.

Invest the cash.

Since this money is for emergencies, it needs to be accessed easily, but ideally, you still want to earn some interest on the funds. Look for investment options that are low risk and allow easy access to funds. To obtain the best return without sacrificing liquidity, consider investing with a laddering strategy.

Although we trust in God's provision and help, wisdom demands a certain level of preparation for hard times. Building an emergency fund is one of the most practical ways to prepare. As one old Chinese proverb says, "Dig the well before you are thirsty."

In upcoming posts, we'll identify the four most critical risk management steps every church should take, as well as how to avoid common church budget blunders. Stay tuned!

For information on investment solutions for your ministry, click here or call 866.621.1787.

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