Interest rates can affect how community associations manage operating and reserve funds. When rates shift, boards may want to review whether current account options still support the association’s financial needs, especially since rates and terms can vary by financial institution and product.

Rate changes can influence more than potential earnings. They can also affect decisions around timing, access to funds, and preparation for planned maintenance, capital projects, insurance renewals, and other community expenses. For funds not needed right away, options such as Certificates of Deposit may offer predictable returns, but boards should also consider how much flexibility and liquidity the association needs.

There is no one-size-fits-all approach. Some associations may benefit from maintaining a combination of liquid funds and fixed-term options, including CDs with varying maturity dates. This approach can provide access to funds as individual CDs mature while creating regular opportunities to review available rates and terms. The right approach will depend on the association’s cash flow, anticipated capital and reserve needs, governing documents, and investment policy.

Key Considerations for Boards

• Review upcoming operating and reserve fund needs. Consider when funds will be needed and whether major projects or expenses are on the horizon.
• Balance safety, liquidity, and yield. Protecting principal, maintaining access to funds, and earning an appropriate return should all be considered when evaluating deposit and investment options.
• Monitor CD maturity dates. When a CD approaches maturity, use the opportunity to compare current rates and available terms before renewing.
• Review applicable documents. Confirm that decisions align with governing documents, applicable statutes, and the association’s investment policy.
• Consider appropriate protections. Evaluate account options with FDIC- or NCUA-insured institutions, or other appropriate protections, when applicable.
• Compare available options. Use available resources, including financial institution rate information, to compare options before making decisions.

Ultimately, a changing interest rate environment does not always require immediate action. It does, however, provide a valuable opportunity for boards to review current accounts, upcoming financial needs, and available options. By balancing safety, liquidity, and yield, associations can make more informed decisions that support both short-term obligations and long-term financial stability.

This content is intended for general informational purposes only and should not be considered legal, investment, or financial advice. Boards should consult appropriate professionals when evaluating options for their association.