If you oversee the finances of a church, the one thing you should always expect is the unexpected. And when the unexpected happens, it always costs way more than you think. Like a freak snowstorm in the inland area of Southern California that exposed a compromised roof and caused severe water damage to a church facility. Or the deferred maintenance on the parking lot that creates a sinkhole and is now a trip and fall hazard. Or a global pandemic that shut down businesses, supply chains, beaches, travel, and schools while ushering in remote work, Zoom meetings, and livestreaming church services. Sometimes, what starts off as a minor issue can quickly escalate into a full-blown disaster – like a crackling noise coming from a speaker in the Worship Center that turns out to be a failure throughout the entire audio system. While financially savvy churches often build sinking funds to handle the replacement of known future costs like a roof, emergency funds are critical when it comes to taking care of unexpected and sudden expenses. Emergency funds ensure the church can continue functioning without significant disruptions or financial hardship. It provides the necessary breathing room between the church and the unexpected.
How Much Should A Church Have In Their Emergency Fund?
Because the unexpected happens, wise churches build emergency funds. In today’s challenging economy impacted by inflation, it’s not easy to set aside a chunk of money that just sits there when there are so many things the church needs. On top of the financial challenges, each church is so different. There is no one-size-fits-all solution for every church. Some churches own their building, while others have a mortgage or rent. Some have brand-new facilities, while others meet in historic buildings. Some churches fight the impact of freezing winters, while others battle the effects of scorching summers. Regardless of your church’s size, financial situation, or location, there are some basic guides the church should use to determine the correct amount for their emergency fund.
For personal finances, Ramsey Solutions and others recommend 3 to 6 months’ worth of expenses for an emergency fund, but that isn’t the best solution for a church. In a 2018 post for CapinCrouse, Sarah Thompson provides a more practical guideline of 40 to 80 days of annual cash expenditures. What does that look like?
If your church has Average Monthly Expenses = $100,000 / 30 days = $3,333
40 x $3,333 = $133,320 – Safe Emergency Fund
80 x $3,333 = $266,640 – Idea Emergency Fund
While this formula isn’t perfect, it is a great starting point to determine an amount and if it’s reasonable based on your church’s needs.
The Secret To Building An Emergency Fund
If the amount needed for the emergency fund shocks you and seems impossible, it’s not, but you need a plan to build the fund. Depending on your church’s financial position, saving that much cash may take a few years. The secret to building an emergency fund isn’t really a secret. It’s found in Proverbs 13:11, “Dishonest money dwindles away, but whoever gathers money little by little makes it grow.”
Once your church has agreed upon an amount for the emergency fund, determine the maximum amount it can put toward that each month. Using the safe emergency fund amount of $133,320 from the example above, it would take a little under two and a half years to build the fund by saving $4,500 per month.
The unexpected happens, and no one is immune – not even churches. The church’s mission is far too critical not to have a plan to weather whatever storm may come. If your church doesn’t have an emergency fund or it’s not as robust as the experts recommend, don’t panic – plan. Agree on an amount using the 40-80-day guide and determine how quickly your church can build the fund.
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