“A recession is a significant decline in economic activity that goes on for more than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country’s gross domestic product (GDP), although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession.”

– Investopedia

This post on Carolyn’s Nonprofit Blog was written originally in 2018. Needless to say, with the onset of COVID-19, the war in Ukraine, and global uncertainly about the dramatic changes witnessed in all aspects of our lives, having a reserve fund makes sense. Smart, forward-thinking nonprofits will continue to add to their reserve funds while diversifying their fundraising techniques and conducting ever more in-depth research to identify a larger pool of prospective donors. Not everyone is negatively impacted by a recession, so let cool heads and smart thinking prevail during challenging times.

I continue to conduct research online from a wide range of global financial experts about the possibility of a recession in the United States. While opinions remain divided, constantly resurfacing concerns that rough waters lie ahead causes me to revisit the idea of nonprofit organizations establishing “rainy day,” or reserve funds.

From USLegal, “A reserve fund is a fund of money created to take care of maintenance, repairs or unexpected expenses of a business.” 

Having watched nonprofits suffer intensely during the last recession of a decade ago – an experience we all hope will never be repeated – my advice for nonprofits during every year-end fundraising season is to be prepared.

Take some of your charitable donations and sock them away into a savings account or other fund where you can get to them easily if and when needed. You might even consider a specific major gift campaign to establish a reserve fund. Regardless, having such a fund in place can help with myriad situations, from recession and lagging donations, to helping your nonprofit launch an entirely new project or fund a new staff position. #JustDoIt

A Few Articles You Might Find Helpful

National Council for Nonprofits, “Common Sense Warns Nonprofit to Get Prepared” (March 15, 2023)

National Council for Nonprofits, “Operating Reserves for Nonprofits” (timeless advice, helpful resources)

PDN: Philanthropy News Digest, “Fear of Recession Top Cause for Declining Donations, Study Finds” (June 17, 2023)

• In 2022, I pivoted to following the advice of Cathie Wood of ARK Invest on YouTube. I read the business and finance press every day.

• Bill Conerly for Forbes, “No Recession in 2022, But Look Out in 2023” (November 2, 2021).

• Fidelity Charitable, “Sustain All Nonprofits” (March 20, 2020).

• Jen Wieczner, Rey Mashayekhi, Lucinda Shen, Erik Sherman, Shawn Tully, and Nicolas Rapp for Fortune, “Spot the Next Recession: Today’s good times can’t last forever. Here’s how to decode the economy’s messages before a bear market eats your savings” (April 24, 2019).

I posted an article on Carolyn’s Nonprofit Blog called, “Economy and Philanthropy” you might also enjoy. It dates back to when I launched my blog during the economic downturn of the early 2010s. Looking back to those days, I would also say, not every business nor philanthropist suffers during a recession. Adjust your fundraising accordingly, and do your research. Panicing is unnecessary.

“Are We Listening Only to Ourselves” is another early blog article you might enjoy reading. I read the business and financial press a little bit each day. Today, one can also watch reports on YouTube.