Stokvels – how the savvy are saving

BANKS are surprisingly seeing more and more high earners investing in stokvels.

According to Standard Bank Customer Financial Solutions Senior Manager, Riaan Appelgrein, it has become abundantly clear the traditional community-based saving scheme is ‘going upmarket’ as different income segments embrace the concept of a group savings scheme.

‘Whether higher earners and professional people are taking to the concept because of the tightening economy that is digging into even their pockets, or because they find it great to benefit from a lump sum pay-out so they can meet major obligations, has yet to be better researched.

‘What is obvious, however, is that savings and investment clubs are now becoming more and more common.

‘At Standard Bank, we see stokvels being formed to help members participate in various investment vehicles, including property and the JSE.

‘Individual contributions are determined by what people can afford; however, once committed, members are determined to contribute without fail.

‘After all, having a number of like-minded individuals with a common objective ensures that you are part of a significant monthly contribution into an investment.’

He said he has no doubt new stokvels being registered are as tradition dictates – used to apply the time-honoured principle of helping members handle major family and financial needs, like paying school and university fees.

‘Then of course, other savvy stokvel members are using their rotational payments to make a dent in their personal debt.’

Benefits
Appelgrein explained it is a good tool to save up larger chunks of cash and injecting it into the repayment of a property or vehicle to decrease interest owed.

‘Even if you are paying off a car on a monthly basis, it is great every so often to pay several thousand rand into the account at once and reduce the balance and interest owed.

‘Putting extra money into a bond has the same impact.

‘The benefits are great as not only is the balance on the loan reduced, but paying in advance means you can shave significant amounts off the total interest bill on a house and reduce the life of a bond by several years.’

Why save via stokvel?
• Stokvels are a great way to avoid temptation and force yourself to save as you make a monthly monetary obligation to a group that must be fulfilled
• It is hard to just withdraw from a stokvel when all the members are your friends
• Stokvels are easy to set up and banks have special accounts for group schemes
• Members nominate Chairpersons and Treasurers from within the membership so members know the people looking after their hard-earned cash can be trusted
• Everybody is working towards a common objective, which is safeguarded by a stokvel’s constitution, making the achievement of purpose fun and a topic of friendly conversation

But be beware
Should anyone wish to join or establish a stokvel, Appelgrein warns they need to take care of the following:
• Be clear as to what benefits you will receive, how regularly and what amounts – a copy of the constitution will provide clarity on this
• Be mindful of promises that seems too good to be true – if it sounds too good to be true, it very often is