STOKVEL – THE SOCIETY SAVING SCHEME
As a citizen of South Africa you have no doubt heard the term “stokvel”. Stokvels are also known as group savings clubs, societies or social clubs, and lately even investor clubs.
A stokvel is defined as a savings society where members regularly contribute, usually monthly, an agreed amount to a central fund. Once the contributions are collected, the stokvel will pay out a pre-determined sum or percentage to a different member each month.
Research reveals that 42% of South African households use stokvels as a savings tool, proving their popularity. Here are a few important things to be aware of and consider in relation to stokvels:
There are many different types of stokvels and each serves a specific purpose. The most common type is the “contribution stokvel” referred to above. There are also party stokvels, grocery stokvels and stokvels that will only pay out at under certain circumstances (such as in the event of death) or at certain times (like Christmas time).
- Stokvels are often governed by a constitution. The constitution includes information pertaining to contribution amounts, duties of each member, the type of stokvel, when meetings will be held, etc.
- Members rarely default. The sense of community and shared responsibility is defining trait of this type savings scheme.
- Knowing when you will get your pay-out makes it easier to develop and execute a financial plan.
- As a way of encouraging savings, some banks now offer specific accounts for stokvels; the benefits of which differ from bank to bank.
Stokvels are a great initiative. However they need to viewed as one of many savings tools available. One should not forego a retirement investment, for example, in favour of exclusively using stockvels. The reason being, even if you are still saving, other types of savings and investment vehicles offer various other benefits that stokvels don’t (such as being geared towards long-term investing, or offering tax saving benefits, etc).
Proverbs 21:20 says “In the house of the wise are stores of choice food and oil, but a foolish man devours all he has.” The Bible encourages us to save and not to spend every cent we bring in or otherwise waste money. The money you receive as a stokvel member should be used wisely and should benefit you not only today but into the future as well.
Lesetja Madiba is a Financial Wellness Consultant at Citadel.