Invest to protect

Money sitting in a standard savings account loses purchasing power every year. If your reserves aren't growing, you're falling behind.

The board should invest reserve funds to at least keep pace with inflation. The approach should be conservative—this isn't money to gamble with—but it shouldn't be idle either.

Match investments to timelines. Money needed in two years belongs in short-term instruments: money market funds, CDs, Treasury bills. Money for a roof replacement in twenty years can tolerate strategies with modestly higher returns.

Consider:

• Safety first. These funds must be available when needed. Don't chase returns at the expense of reliability.
• Liquidity matters. Some assets fail early. You need access to funds without penalties.
• Diversification. Don't put everything in one instrument or institution.

If the board lacks investment expertise, hire a financial advisor. The cost is worth it. A good advisor will create a ladder of investments matched to your asset replacement timeline, ensuring funds are available when needed while earning reasonable returns in the meantime.

Letting reserves sit in a zero-interest account isn't conservative—it's negligent. You're guaranteeing that your purchasing power erodes every year.