Stokvels best savings vehicles if you lack discipline
At this time of the year it is no surprise to find officials and members of most stokvels punting their associations to all who are willing to listen and can possibly afford to join them.
They market the stokvels, which generally run for 10 months, hoping to add new members as stokvels lose some members due to various reasons such as unemployment.
People who join such stokvels are attracted to them largely because they make payouts either in December or January, giving members an extra income to cushion them against a financial fallout during those two expense-heavy months.
Since some stokvels have restrictions on what members can spend their cash, those that pay out cash at the end of an investment term stand a better chance of attracting members as they give members freedom to do whatever they want with their funds, be it buying school necessities for children, buying groceries, paying a bond or repaying a car.
However, it is important to note that stokvels are not the only option if you want to save. Many financial institutions offer a variety of savings products.
I've seen many times how stokvels collect monthly contributions from members then deposit the money with a registered financial institution to enjoy interest rate benefits that also apply to individual savings accounts.
If you are disciplined with your money, you may want to consider stashing your cash away in an interest-bearing account and withdrawing it at year-end.
However, you may find it easy to start saving in January, but a few months down the line due to some emergency or personal weakness, you dip into the funds. If this is the case, you may want to consider joining a reputable stokvel that has been in the game for many years.
A stokvel imposes a culture of group discipline and there is a set of rules, making it difficult for members to fail to contribute or dip into contributions at will.
For example, a member who makes a late contribution is required to pay a fine.
I know of one stokvel that gives members an opportunity to make monthly contributions of at least R200 by no later than two days after the 25th of each month. Failure to do so attracts a R50 fine.
Although stokvels that encourage long-term savings with appropriate investments play a more meaningful role, those that pay out annually have their place. If you contribute R500 a month, you can look forward to a R5,000 payout after 10 months.
So, if this is your savings option, it is important to choose your stokvel wisely. Join a group of people you can trust so your money will not disappear - a group that has drawn up and sticks to the rules of the organisation.
It is also worthwhile finding people you relate to and with whom you can socialise.
Also, make sure that the stokvel makes electronic payouts directly into your bank account rather than risking a few members physically withdrawing the cash and potentially being robbed.