As a charity, choosing to invest can be a powerful way to generate funds and secure long-term financial stability. With the right planning and risk management for nonprofit investing, you can make informed investment decisions that support your charity financially while also aligning your goals. This article will help you to start investigating if investing is the right choice for your charity.

Reasons for Nonprofit Investing

When charities have money, they do not plan to spend in the short-term, they often keep it in a bank savings account. This is a low-risk option since most banks are protected by the Financial Services Compensation Scheme (FSCS). The FSCS is the UK’s deposit guarantee scheme and protects eligible deposits of up to £85,000.

Savings vs. Investing for Nonprofits

However, the downside of keeping money in a savings account is that they often offer lower interest rates, meaning you will not earn as much money back in interest. Also, inflation can erode the purchasing power of your money over time, so when you eventually decide to withdraw your savings, your money might not buy as much as it did when you first deposited it.

Investing, on the other hand, can allow your money to appreciate over time because, instead of saving it you are using it to purchase assets that can increase in value. For example, investing in company shares gives you ownership of a small fraction of that company. As the company grows, so might the value of your shares, offering an opportunity for returns in the future.

What Are the Benefits of Investing?

With nonprofit investing, it is important to manage your funds in a way that maximises their value. Investing can be used as a tool to keep your money's value from falling while also generating healthy potential returns.

Having your money passively increase can help your charity's financial stability, generating revenue that can be used for unexpected circumstances or future costs. Investing can offer a new stream of income that requires relatively minimal active effort. Once you have chosen where you want to invest, you can simply wait and let your money do the work.

Read the full article about nonprofit investing at Charities Aid Foundation.