10 July 2026

How much cash should a charity keep in reserve?

A charity’s reserves are the funds it keeps available for future needs, unexpected costs, or planned activity. 

There isn’t one fixed amount that every charity should hold. 

The right level depends on the charity’s work, income, commitments and future plans. 

 

What are charity reserves for? 

Reserves provide financial stability. 

They help a charity continue operating if income changes, costs rise, or timing doesn’t go as expected. 

They can also support planned decisions, such as funding a future project, covering a quieter income period, or allowing time to respond to changes. 

The purpose isn’t to hold money for the sake of it. 

It’s to make sure the charity has enough financial flexibility to keep working towards its aims. 

 

Is there a standard amount charities should keep? 

No. There isn’t a universal figure that applies to every charity. 

Some charities may need several months of running costs in reserve. Others may need more or less, depending on how predictable their income and spending are. 

For example, a charity with regular, reliable income may need a different level of reserves from a charity that depends on grants, fundraising events or irregular donations. 

The reserve level should reflect the charity’s own circumstances. 

 

What should trustees consider? 

Trustees should think carefully about what the charity needs to keep available. 

This may include: 

• Regular running costs 
• Staff costs 
• Existing commitments 
• Future projects 
• Income uncertainty 
• Risks that could affect the charity’s work 
• How quickly money could be accessed if needed 

The aim is to hold enough cash to support the charity’s responsibilities, without holding more than is reasonably needed without a clear purpose. 

 

Can a charity hold too much in cash? 

Potentially, yes. 

Holding cash can be appropriate, especially for money needed in the short term. 

But if a charity holds more cash than it needs for day-to-day costs, planned spending and sensible reserves, trustees may need to consider whether that money could be managed differently. 

This doesn’t mean investing is always the right answer. 

It means trustees should regularly review whether the charity’s money is being held in a way that supports its purpose and responsibilities. 

 

How does a reserves policy help? 

A reserves policy gives trustees a clear framework for decision-making. 

It should explain: 

• Why reserves are needed 
• How much the charity aims to hold 
• How that figure was decided 
• When the policy will be reviewed 
• What should happen if reserves are too high or too low 

A reserves policy is most useful when it reflects the charity’s real position, rather than sitting in a document that’s rarely looked at. 

If you want to explore this in more detail, you can read more about why a reserves policy is a good idea, not just good compliance here. 

 

Should surplus cash be invested? 

Some charities may decide to invest cash that isn’t needed in the short term. 

This can help money work harder over time, but it also involves risk. Investments can fall as well as rise, so trustees need to consider the charity’s timescales, needs and responsibilities carefully. 

Before investing, trustees should usually think about: 

• When the money may be needed 
• How much risk is appropriate 
• Whether the charity has an investment policy 
• How decisions will be reviewed 
• Whether advice is needed 

The decision should be proportionate and clearly linked to the charity’s purpose. 

 

So, how much cash should a charity keep in reserve? 

A charity should keep enough cash to meet its needs, manage uncertainty and support its future plans. 

The right amount won’t be the same for every charity. 

What matters is that trustees can explain why the reserve level is appropriate, how it was decided, and when it will be reviewed. 

If your charity is reviewing its cash reserves and wants to discuss the options available, you can get in touch with us.