How Much Should Your Church Be Saving

Unplanned expenses are inevitable. How prepared is your church for the next unexpected event that interrupts routine cash flow?

COVID taught us that circumstances can dramatically change in a matter of days. Within one week’s time, many churches were unable to hold in-person weekend gatherings. We witnessed COVID impact our communities as well. Businesses and restaurants closed. Employees lost their jobs. This continued week after week. Weeks turned into months, months turned into a year.

As attendance declined and giving decreased, many churches dipped into savings or incurred debt to transition to “online church” and support ongoing operational expenses. Was your church prepared for the financial impact of COVID? Is your church still recovering?

We all pray and hope that a global pandemic will not occur again, but the church will likely experience periodic unplanned expenses or events that affect cash flow. Equipment fails, pastors retire or resign, missionaries request support, and so on and so forth. However, as members of God’s Kingdom, we don’t live in fear of what may be lurking around the corner. Instead, we must use wisdom in preparing for unexpected events and expenses.

This begs the question, “How much should your church have in savings?”

The general answer is three to six months of operational and ministry expenses, but let’s break this down into more specific and actionable steps.

1. Determine your monthly expenses.

First, figure out the cost of one month of ministry for your church. Since church income and expenses fluctuate throughout the year, take last year’s annual expenses and divide it by 12 months. For instance, if your annual ministry expense is $150,000, the monthly average expense is $12,500.

2. Multiply your monthly expenses by three.

Once you’ve determined your church’s average monthly expenses, multiply that number by three. In this example, the minimum savings goal is $37,500 ($12,500 x 3 months). Saving at least three months of expenses should provide you with enough financial margin while you navigate through unexpected financial burdens and make necessary financial and organizational adjustments. It will also allow you to take care of emergent financial needs without interrupting the current month’s cash flow.

3. Diversify your savings.

Finally, it would be wise to diversify your savings. Consider keeping at least one month’s expenses in an easily accessible checking and/or savings account. The remaining two months’ savings could be placed in a short-term investment note. This would allow your savings to grow at a higher rate and support fellow ministries.

For example, Church Extension Plan offers a 30-day access account, which usually provides a higher interest rate than a local bank’s savings account. The funds become available with a 30-day written notice, and there is no early withdrawal penalty fee with that advanced notice.

So, in our example, the church would place $12,500 in a local bank account (checking/savings) and invest the remaining $25,000 in a 30-day access account.

Practicing Stewardship

Unexpected events and unplanned expenses are part of ministry. Having an adequate savings account will help you face these events and expenses with more confidence and less stress. Above all, it is wise stewardship of the resources that God has entrusted to your church to advance His mission in your community and beyond.

Church Extension Plan is your partner in ministry. Feel free to contact us to discuss your savings and investment needs.

Next steps:

1) Determine your church’s minimum savings amount.
2) Adjust current cash flow to allow a portion of your church’s income to be placed into savings.
3) Contact Church Extension Plan about investing in a 30-day access account or other investment note.