"How many months of reserves should we hold?" is one of the most common questions association boards ask — and one of the least clearly answered. Too little, and a single bad year threatens survival. Too much, and you're sitting on members' money that should be working for the mission today.
There's no universal number — it depends on how predictable your income is, your fixed costs, and your risk appetite. But the discipline is universal: a board should consciously decide its reserves target, write it down as a policy, and review actuals against it — rather than letting the balance drift and calling whatever happens "prudent."
The conversation matters as much as the number. A board that has deliberately decided "we hold X months because Y" is governing. A board that's simply accumulated a pile of cash with no stated rationale is hoarding — and may be quietly failing the members it's meant to serve now.
Decide it on purpose. Then you can defend it to members with a straight face.
How a board sets reserves and financial sustainability policy is covered in the financial modules of both courses.
Free tool: the Reserves & Liquidity Calculator.
Annie
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