Stokvels are informal savings clubs where members contribute regularly to a common fund, which is then distributed among the members at a predetermined time.
There are different types of stokvels to accommodate different needs, such as burial funds, property investments, monthly groceries and annual pay-outs, typically in the festive season. While stokvels have primarily been popular with older women in particular, more millennials have begun to embrace this method of saving and investing.
Benefits of joining a stokvel
Each stokvel has its own constitution, which is collectively decided by its members. They get to decide how the money will be collected, who is in charge of collecting it and where it will be invested. Each member has an equal voice and is free to discuss any concerns or grievances they may have. There is complete transparency, accountability and a culture of open communication between members.
By relying on the power of community and collective savings, you gain an additional stream of income while empowering yourself and others in your community.
Traditional or savings stokvel: In this form of stokvel, members contribute a fixed amount of money to a common pool at regular intervals, usually monthly. Each member receives a lump sum equal to their monthly contribution at the end of the cycle, usually annually.
Borrowing stokvels: Such groups save money into a pool and use it to loan money to members and sub-members. Borrowing stokvels usually charge high interest rates for the sustainability and profitability of the groups operational model. The saved money is then shared at the end of the year where the interest is divided among members.
Grocery stokvels: Members contribute money towards bulk purchases of groceries, which are then distributed among the members at the end of the year. This type of stokvel helps members save on the cost of groceries by buying in bulk. The stokvel buying season peaks between the beginning of November and the middle of December, and purchases are made at outlets geared towards bulk purchases.
Merry-go-round or rotational stokvels: These are the most basic form of stokvels, where members contribute a fixed amount of money to a common pool weekly, fortnightly or monthly. Members receive the lump sum on a rotational basis and they are free to use the money for any purpose.
Burial society stokvels: These stokvels are formed to assist members with funeral expenses. Members contribute regularly and when a member experiences a bereavement, the stokvel provides financial support for the funeral.
Investment stokvels: In this type of stokvel, members pool their resources to invest in assets such as property, stocks or businesses. The returns on the investment are then distributed among the members.
Education stokvels: Members contribute towards a fund that is used to cover education-related expenses such as school fees, uniforms and stationery for their children.
Burial societies: Burial societies provide an informal, but reliable form of insurance to help members and their families with the costs of funerals. Burial societies also provide practical support for the family during the preparation.
Travel stokvels: Members contribute towards a fund that is used to finance group travel. The funds are used to cover travel expenses such as accommodation, transport and activities.
Social clubs: These types of groups pool funds to arrange social activities. This entertainment may either take place at every meeting of the group, or the group may save regularly towards less regular social activities.
Steps to join a stokvel
Understand your goals: Define your personal financial objectives. Are you saving for a specific purchase, an investment or a safety net like funeral costs? This will help you choose the right type of stokvel.
Find a trusted group: Trust is the cornerstone of a successful stokvel. It is highly recommended to join a group with friends, family or community members you know personally. Some stokvels operate on a referral basis, where existing members vouch for new ones.
Review the constitution: Every formal stokvel should have a constitution outlining its rules, contribution amounts, payout structure and penalties for missed payments. Ensure you understand and agree to these rules before joining.
Agree on logistics: Discuss practical matters like how often meetings will be held, when contributions are due and how the pooled money will be managed (e.g., in a special stokvel bank account).
Start contributing: Once all agreements are in place, begin making your regular, fixed contributions as scheduled. Financial discipline is key to the success of the group and your personal savings goals.
By carefully considering these factors and aligning with a group that shares your vision, you can leverage the power of community savings to achieve significant financial goals.
Leave a comment