Some schools refer to it as a “rainy day fund.” Others call it “financial prudence.” But whatever the label, a growing number of independent schools are sitting on cash reserves big enough to make their bank manager smile and their community wonder.

The question isn’t whether a reserve is wise — it’s whether holding too much, for too long, is quietly undermining the very mission those reserves are meant to protect.

The Charity Paradox

In the corporate world, when a company holds more money than it needs to invest efficiently, it returns the surplus to shareholders as dividends. Schools can’t do this; they’re charities. Every dollar that isn’t required for essential operating stability should, at some point, be invested back into students and the school community.

Yet, across the sector, I’ve seen both large and small schools tuck away more than they need, year after year. This isn’t about funding inequality or the public versus private sector. It’s about decision-making. Tight-fisted thinking isn’t proportional to the size of the budget.

When Strategy and Spending Don’t Match

It’s common to see a school’s strategic plan filled with bold words about “developing and empowering staff,” “future-proofing facilities,” or “innovating the student experience.” However, when budget season arrives, strategic professional learning is often not prioritised.

Middle leaders prepare thoughtful budget requests and wish lists, programs that could transform teaching, and resources that could unlock creativity, only to be told “not this year” while millions remain untouched in reserve. The disconnect between declared strategy and resourcing strategy erodes trust faster than most leaders realise.

The Opportunity Cost of Over-Caution

Yes, reserves are there to protect against downturns and unexpected shocks. But excessive caution comes with its risks:

• Innovation stalls.
• Morale declines when staff see opportunities blocked - or worse - missed completely. 
• The school’s competitive position weakens while others move ahead.

The irony? Spending strategically can actually protect your reserves by boosting enrolments, strengthening donor confidence, and reducing future reactive costs.

It’s Not the Size — It’s the Alignment

I’ve worked with schools whose reserves could fund several years of operations without a cent of income — and others with only a few months’ cushion. They may both be guilty of the same issue: holding funds without any strategic intent.

A school with a $2 million reserve and a clear investment plan for the next three years shows far more stewardship than one with $20 million – and a plan to save as much as they can.

Where does this mindset of stockpiling vast reserves come from? Often, it’s rooted in a culture of financial conservatism. It’s shaped by past crises or advice from risk-averse auditors. Sometimes it’s even a long-serving board member who relentlessly preaches caution as a legacy of fiscal prowess.

In many schools, the real keyholders to the reserve are a small circle of board members or senior executives who control its release.

Nature gives us a gentler lesson: squirrels only store what they need for the winter. Stockpiling far beyond your foreseeable needs may be completely unnecessary. Instead, it can create its own risks by keeping resources locked away when they could be fuelling growth, innovation, and community impact.

Better Questions for the Boardroom

Before approving another year of “hold steady,” boards should be asking:

• What proportion of our reserves directly supports our current strategic priorities?
• How do we measure the return on any investment drawn from reserves?
• What will it cost us — in culture, enrolments, and opportunities — if we don’t act?
• Have we explained our reserve policy clearly to our staff and community?

The Optics Matter

Parents, staff, and alumni are becoming increasingly aware of how resources are utilised. Announcing fee increases while simultaneously publishing a surplus can damage trust, even if the decision was financially sound. Transparency isn’t just good governance — it’s strategic risk management.

From Hoarding to Harnessing

Every dollar should have a destination — whether that’s enhancing student learning, funding professional growth, upgrading facilities, or strengthening wellbeing programs. The role of leadership isn’t to guard the vault for its own sake, but to ensure the vault’s contents are put to work for the mission.

So, the next time your board talks about “playing it safe,” ask whether safety is serving your students — or simply serving your comfort zone.

Checklist: Is Your Reserve Strategic or Stagnant?

• ✅ Does it have a defined purpose and timeline for deployment?
• ✅ Is it linked to measurable outcomes for students and the community?
• ✅ Is it sized to protect against realistic, modelled risks — not imagined disasters?
• ✅ Has the policy been communicated transparently to staff and families?

If your answers are mostly “no,” you may not be protecting your school’s future — you might just be protecting your bank balance.