Are you saving with your burial society? PG 29

2015-07-30 06:01

Photo: Stock.xchng

Photo: Stock.xchng

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WITH jobs under threat and households facing an uncertain economic future, having money available for an unexpected event is essential.

But saving is difficult - particularly in tough times, when your pay cheque barely seems to cover the basics.

Starting a stokvel might be one way to help your saving endeavours. Millions of South Africans can’t be wrong, after all. Every year, billions of rands - some people say more than R5 bn - are invested in an estimated 800 000 stokvels in South Africa. According to some studies, nearly half of black South Africans belong to a stokvel.

Traditionally, a group of stokvel members will each contribute a fixed amount on a regular basis and take turns to receive the full amount.

But there are many variations. Some stokvels pool the contributions together and invest it to get bigger returns for members. Some will identify promising small businesses and commit money to the entrepreneurs.

Burial societies have grown from the stokvel tradition. Typically, members will contribute and claim for burial costs when a family member dies.

Why consider a stokvel?

• The peer pressure will force you to save.

• Pooled money can earn better returns at a lower cost. Banks offer higher interest rates on bigger amounts and banking costs are lowered (in some cases, free) if the amount is large enough. On your own, you won’t get the same treatment.

• Some of the added benefits are a sense of community and socialising. Stokvel members meet regularly and make an occasion of the meetings.

• You may learn something. Some stokvels operate like investment clubs. Members do their homework, deliberate about where to invest and make investment decisions.

• Knowing when you will receive a windfall amount makes it easier to plan your finances.

How do you start a stokvel?

The first step is to get the right members. They should be people who trust each other.

Everyone should agree to the rules of the stokvel. This includes how much everyone should invest, who will manage the money and where and how often meetings will be held.

An important decision is where their investments will be made. Everyone must agree beforehand about how much risk can be taken on. Then they have to explore the best way to invest the money.

— Women24

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