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7/13/2020

Make the complex simpler with a reserve account

  • Tag for article:Community Association Banking Articles

Whether your community association needs funds fast for things like insurance premiums and minor repairs or a long-term financial plan for larger, strategic investments, putting funds in a reserve account is a safe way to get a return on the investment while retaining maximum liquidity.

Here are four criteria your board should look for when considering reserve accounts:

1. Security

Governing documents or a financial policy may require an FDIC-insured, other government-backed or other insured product with no risk to the principal investment. Security is an absolute priority and should be considered non-negotiable when looking at financial products.

2. Liquidity of Funds

While most community associations make long-term plans for larger investments in properties, they may also need funds at any moment. Because emergencies or unexpected situations can arise without warning, be sure you can access your reserve funds with relative ease.

3. Rate

A product that will provide a steady, reliable rate of return is a must for ensuring your assets will grow and provide your association with the maximum amount of funds possible to maintain and enhance property values.

4. Efficiency

Once a directive has been determined, you need a banking partner that can execute that directive efficiently and effectively to find the product that best fits.

With those four characteristics in mind, there are a number of products that can accommodate your association’s financial and investment needs.

Money Market Accounts
Money markets are a great way to fund projects that are going to happen on a short timeline. Your funds are secure and gain steady interest, and the assets stay accessible.

Premium Reserve Solutions1
Funds over FDIC limits are backed by a surety bond.2 A bond-backed reserve provides flexible investment options, the ease of dealing with one bank and a competitive rate of return to grow reserve funds.

ICS®, the Insured Cash Sweep® service3
ICS is a smart way to secure large deposits while maintaining access to and earning interest on funds placed into demand deposit accounts and money market deposit accounts. Deposits are eligible for multimillion-dollar FDIC protection that is backed by the full faith and credit of the United States government.

CDARS®, the Certificate of Deposit Account Registry Service®4
CDARS is the most convenient way to access FDIC insurance on multimillion-dollar certificates of deposit (CDs) and to earn CD-level rates while working directly with only one financial institution.

Certificate of Deposit Ladders
CD laddering products are well-suited for projects that are going to happen in phases. You can set a CD ladder to mature at each phase of the project — in one-month, three-month, six-month, nine-month and 12-month certificates — and customize the amounts and lengths of multiple CDs to provide rolling access to your money as each term ends. CD ladders provide greater fund liquidity and flexibility, all while keeping your funds protected. And you still enjoy the efficiency of working with one bank that provides one summary statement of your holdings.

Whatever product or products work best for you, it’s important to work with a financial institution dedicated to effectively managing assets, building relationships and making your complex needs simpler. Let's get going.

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