It takes a lot of self-discipline to save money and it’s easier if you have the support of friends. That’s what Noluthando Ndlwana, a single mom from Cape Town, has discovered. She’s managed to save enough money to pay next year’s school fees, among other things. Savings clubs or stokvels are a good solution for people who struggle to save on their own but here’s what you need to know before joining one.
CHOOSE YOUR FRIENDS WELL: For a savings club to be successful, its members need to trust one another. Whether the club comprises friends or family members, you need to be sure everyone always contributes and there’s nothing dishonest going on. Each member should feel confident they’ll get their money back if they leave the club.
LAY DOWN THE RULES: As a savings club, you’ll need to agree on a few rules, such as how much you’ll be saving and what happens if a member skips a contribution or leaves. You also need to appoint someone to keep track of the contributions, as well as decide where you’ll be saving (a bank savings account, investment and so forth) and when or how often you’ll be meeting.
CONTRIBUTIONS:Firstly You need to decide how much each member contributes each month. If everyone contributes the same amount, for example R250 or R1 000 a month, it’s easier to equally divide the capital and interest at the end of the savings period. You need to set a monthly payment date, as well as a date on which the total savings will be paid out to the members.
MEMBERS LEAVING OR NOT PAYING: Noluthando suggests fining members for non-payment. They can either pay the fine the following month, or the amount can be subtracted from their savings amount at the end of the period. The fines will be added to the overall savings and divided between the members. And it should be agreed on that anyone who withdraws from the club will only get their money at the end of the year.
BOOKKEEPING: Depending on the club’s size, you need to appoint one or more members to take care of the bookkeeping and ensure everyone pays their share. For example, if you have 10 members, choose three to pursue nonpayers and invest the money. If your investment is in a bank savings account, the treasurer and two other members should have signing rights. Because you’re a group of people who trust each other, choosing the bookkeeper(s) should be easy. You also need to keep a record of your own contributions, Noluthando says. This is especially important if you each pay a different monthly amount.
SCHEDULE MEETINGS:It’s important to have regular meetings. The bookkeeper must share the balance sheet with the members at these meetings and the contribution book must be open so everyone can see it, Noluthando says. When you get together, you are supporting each other in your savings efforts. If anyone feels like quitting, the others can offer encouragement to convince them to stay.
CHOOSE HOW TO SAVE :It’s important that all the members agree on the method of saving. Clubs that want to keep their investment fairly simple usually opt for a straightforward savings account. Noluthando says money should never be paid into an individual's personal bank account. Instead, open a new account specifically for the savings club. Certain banks offer specific stokvel accounts but the most important thing is to establish the fees and interest involved. The fees must always be less than the interest earned. Fixed notice deposits – where, for example, you need to give six or 12 months’ notice before money can be withdrawn – usually offer better interest rates than savings accounts where you have immediate access to the money. A financial planner can provide more information about unit trusts, where your capital will be protected and you might earn a higher interest rate than in an ordinary savings account. Many unit trusts focus on beating the inflation rate, so your investment grows without losing any value.
BENEFITS OF GROUP SAVINGS
-They work well for people who are trying to save in the short term towards a specific goal. Plus, you’re committed to saving because you can’t suddenly stop contributing or decide to withdraw your share. Instead, you have to abide by the club’s rules, Noluthando says.
-You’re saving to buy or pay for something, rather than incurring more debt.
-Larger amounts earn more interest, so the members’ combined savings could yield a greater return on your investment.
-If one of the members is knowledgeable about finances or investments, the other members can learn more about managing their own finances.
GET HELP HERE:For general tips on saving, go to the website of the South African Savings Institute (Sasi): savingsinstitute.co.za The Financial Sector Conduct Authority (FSCA) has lots of information on its website at fsca.co.za