How to start a stokvel
Just as some people exercise more when they have an exercise buddy, others find it easier to save when they do it in a group. For the undisciplined spender who is constantly cashing in their savings, a Stokvel, or group savings club, could be the answer. But stokvels are worth taking note of for another reason. Did you know that money saved in a stokvel often benefits from better interest rates and lower fees than you would pay if you put your money in a bank savings account? Sound good? This is what you need to know if you want to start a stokvel.
Types of stokvels
Usually a stokvel is started for a specific reason. The members of the stokvel may share a common goal for saving such as December groceries or a wedding. For example, a group of young ladies may get together and save in a stokvel for the purpose of funding their bridal parties.
Current estimates from the National Stokvel Association of South Africa are that the South African stokvel economy is worth R49 billion and that there are over 800 000 stokvel groups.
Quick disadvantages of stokvels
There is a downside to everything… so be aware of these dangers and figure out how you can minimise the risk of them happening to you.
• A fellow member may go AWOL after they’ve received their money.
• In most cases there’s no interest on contributions.
• Payments could be insufficient to meet your needs.
Quick advantages of stokvels
But there are lots of upsides too… think about the following:
• Saving through a stokvel gets you into the healthy habit of regular saving.
• You can finally buy something or settle a debt you’ve been battling to save for.
• You can loan out the money and receive competitive interest.
Members and savings
There is usually a minimum of 12 members in a stokvel. However, you may choose to have a smaller number of members in your savings group. The average South African stokvel member contributes about R711 a month.
This is an important document that must be drawn up when you start a stokvel. Think of it as the group’s guidebook. The constitution should include guidelines on:
How often and in what manner money is to be collected each month.
How the money will be invested.
Under what circumstances withdrawals may be made.
What happens if a member fails to make contributions or decides to leave the stokvel.
What happens if a member dies.
The process if a new member decides to join the club at a later date after inception.
The constitution is particularly important as it provides a reference point and can pre-empt disagreements within the group before they occur.
The bank account
You should have two to three authorised signatories on the bank account and this should be set up so that none of the authorised signatories can make withdrawals without the signature of the others. The stokvel should be audited regularly by an independent auditor and the auditing records should be freely available to all members.
First National Bank provides a Stokvel Account that is aimed specifically at people saving as a group, with no monthly fee.
Absa’s Club Account requires a minimum deposit of R50 to open the account, and zero transaction fees, and the savings are available on a 32-day notice period. The interest rate is tiered, so that the more money saved, the higher the interest you earn.
Nedbank’s Club Account requires a R100 opening deposit, offers zero account maintenance or transaction fees, and unlimited withdrawals
Standard Bank’s Society Scheme savings account requires a R100 opening deposit, provides anytime access to funds, and offers cash prizes in regular draws as long as the account balance stays above R5 000. There is also no account fee if the balance is kept above R5 000.
When you start a stokvel, make sure that you follow these simple steps:
• Choose the right members – Choose people you can trust who share common values and savings goals. Dishonest people tend to disappear after they’ve got their money, and fail to contribute to others. Choose people who can stick to the rules!
• Choose a goal for the stokvel – Some stokvels contribute money so they can buy groceries and others for home appliances; some pay someone in cash monthly, while others simply invest the money in a joint stokvel account. Decide what your goal is at the outset and stick to it.
• Decide how the pay-out will be made – Will the money get deposited or given in cash form? These conversations need to happen before time. Most groups will opt to deposit the money due to safety reasons.
• Have a clear set of rules – Everyone should know the rules and stick to them. Rules can include penalty fees for late contributions. Decide who keeps bank slips and what happens when a person can’t continue with the stokvel. There might be a need to have a formal contract based on your relationship and how big the group is.
• Save with purpose – You need to know why you’re personally joining a stokvel. Will you pay off a debt or invest for your children’s education? If you have a clear goal in mind, you will be more likely to reach it.
Good luck and start saving today!
Author: Spencer Kahari | Co-Founder | Chairperson | School of Empowerment: AFRICA
Licence: All Rights Reserved @2019