One of the first steps in embarking on your cash management and investment journey with Infinite Giving is making your initial deposit. In this guide, we'll delve into why we ask for an initial deposit amount, recommendations for initial deposits for reserve accounts, and suggestions for endowment seeding.
Why We Ask for an Initial Deposit Amount
Your initial deposit serves as the foundation of your financial portfolio. Your initial deposit enables us to create a diversified portfolio tailored to your financial goals, risk tolerance, and investment horizon. This ensures that your portfolio aligns with your objectives from the outset. This number is not set in stone and can be changed, however, we need to know a good initial estimate.
Recommendations for Reserve Account Initial Deposits
Reserve accounts play a crucial role in maintaining liquidity and managing unexpected expenses. Here are some recommendations for determining your reserve account initial deposit:
Assess Your Nonprofit's Expenses: Start by evaluating your expenses and discretionary spending. It is standard practice for nonprofits to set aside 3-6 months of operating expenses in reserves. However, after Covid, many experts recommend setting aside 6-12 months of reserves.
Consider Income Stability: If your income is relatively stable, you may opt for a smaller reserve account initial deposit. However, if your income is variable or uncertain, err on the side of caution and aim for a more robust reserve.
Account for Specific Needs: Factor in any unique circumstances or financial obligations that may necessitate a larger reserve. For example, if you have a large project such as a building fund you are spending from regularly, you may want to set aside additional funds.
Regular Review: Periodically review and adjust your reserve account based on changes in your organization's financial situation, expenses, and income stability. Replenish your reserve account after withdrawing funds to ensure it remains adequately funded.
Recommendations for Endowment Seeding
Endowments serve as long-term investment vehicles designed to support specific causes. Here's how you can determine the initial seeding amount for your endowment:
Define Your Objectives: Clearly outline the purpose and objectives of your endowment and how the funds will be used. Create an Endowment Policy. You can download an example from our website here, but we also help create customized endowment policies as part of the services we offer to current investment clients.
Calculate Sustainable Withdrawals: Determine the annual spending rate or withdrawal policy for your endowment. This rate should strike a balance between supporting the chosen cause and preserving the endowment's principal over the long term. The recommended percent is usually around 4% annually.
Consider Inflation and Growth: Account for inflation and expected investment returns when calculating the initial seeding amount. Aim to seed your endowment with a sufficient amount to generate sustainable income and withstand market fluctuations.
Seek Professional Advice: Consult with your Infinite Giving financial advisor specializing in endowment management to determine the optimal seeding amount and investment strategy for your specific goals and circumstances.
By following these recommendations, you can make informed decisions about your initial deposit, reserve account, and endowment seeding, setting yourself up for a successful financial journey.
Should you have any questions or need further assistance, our team of experts is always here to help!