What a Church Should Have in Their Operating and Capital Savings

What’s the difference between the two?

Most churches do not think about separating the two. If they have any savings it is usually just labeled as that, savings. However, it is prudent to have two different buckets. Capital savings would be used for unexpected repairs or maintenance on your building/property. If you are renting this may not be as big of a need. Operating savings would be what in personal finance is referred to as an emergency/rainy day fund. Money to fund operations if unexpected events, like COVID, happen.

How much should you have in each?

This would differ from church-to-church but we would encourage every church to have at least 3 months of operating expenses saved. Meaning if donations dropped to $0, the church would be able to fully operate for 3 months. For capital savings, using a percentage of your budget (1-2% annually) or based on square footage (X cents per total square footage) is a good place to start.

Tips to savings

1. Create a line item in your budget for saving. If you are starting from $0 carve out 5 – 10% of your budget to go towards savings.
2. Build operational savings first. We would want to see cash savings to cover 3 months of expenses first before shifting towards capital savings.
3. Keep savings in a different bank account ideally with another institution. This is two-fold:
   • First, we are relying on the out-of-sight out-of-mind effect. If you pull up your regular banking information we want you to see the amount of money you should actually be spending. It also takes more effort to transfer money from one institution to another.
   • Secondly, most banks do not have competitive savings account interest rates. Take advantage of large amounts of money sitting in the bank. We recommend using Wesleyan Investment Foundation.
4. Do not use money from your savings unless absolutely necessary! These funds are for the specific purpose of emergencies/unexpected events. Once you rely on them for to cover for overspending or not properly budgeting it will make it easier to do it again and again.
5. Capital savings should be for routine maintenance and repairs. This is a bit of a reiteration from the above point, but these savings are for something like the HVAC needing to be repaired or replaced. Routine expenses should be built into the budget.

How much is too much?

This again would depend on your church. However, if you have built your operational savings to 6 months and have a healthy capital savings balance we would encourage you to prayerfully consider investing more into your outreach whether that be internal ministries, missions or benevolence.

Should you have a different account for different savings?

No, with good accounting we can easily keep track of this in your books. No need to complicate things.