The current national lockdown gives people an opportunity to scrutinise their financial situation. And to do some financial spring-cleaning if they must.

The key is in differentiating between your wants and needs as well as communicating about money with your household. This is according to author of Stokvels and champion of financial literacy Palesa Lengolo.

Lengolo shared some of her wisdom during a live webcast while in conversation with Sowetan editor Nwabisa Makunga. Topics such as talking to your children about money were discussed, what to look out for when starting a stokvel and also whether it was wise to take up the offer of a payment holiday... to which Lengolo replied:

 “It’s so important to be financially literate and financially educated, not necessarily formally but just keeping yourself informed on what’s happening right now. And knowing, for example, with the payment holiday, asking the right questions when you do get to the bank...When you are going to take a payment holiday, which I think in my opinion is a last resort, make sure that there is no other alternative that you have researched and you really are in a corner and you are aware that there are charges that you will still be paying and the fact that your debt will be longer and it will be more expensive in the long run.

"But there’s also a smart way of doing the holiday. You know, maybe you'll take the three-month holiday. Then you are fine and you have a windfall or maybe a lump sum [then] you pay back all the interest that you incurred during the payment holiday, in a way getting you back to where you were initially.

But if you take it and then after the holiday you just continue, you have made an expensive choice. While taking a payment holiday you will also be under the assumption that you don’t have  credit life, which would be the first option to explore in asking: I do have credit life, I have been paying for it, what are the terms and conditions?”

On stokvels, Lengolo said that this should be an exciting time for them, especially the lending stokvels.  

 “They must be thriving, because you are lending each other within the stokvel, you don’t have to go to any other financial institution. And the whole point of the stokvel is a community that helps each other. So it’s very rare that all of you are financially strained at the same time. It’s a chance for people within the stokvel to help those who are more financially strained.

You can actually put it in writing that the ones that are still fine can continue with the contribution and the ones that are not can get a contribution holiday, where they will now pay back with interest their contribution after the three months to their stokvel. The second advantage is lending each other the stokvel contribution to some of the members that will be retrenched. Because these are some of the purposes of a stokvel and they are usually within the constitution.”

Lengolo states that stokvels should have reserve funds, that there must be some kind of cashflow, reserved funds for emergencies and other unforeseen circumstances. In her book, she outlines how to budget within a stokvel with information on how to manage reserve funds.

“One of the reasons I wrote the book was to help use this old traditional system [of stokvels] in a new mordernised way to solve modern problems... As much as we encourage investments and going after opportunities within the stokvel we need reserves.”

For those interested in finding out about joining a stokvel there are various checks you can do. First, you’d need to find out if a stokvel is legitimate as there are lots of scams in the stokvel industry. You must check if the stokvel is registered, it has a constitution, if their money is being used in legitimate opportunities and if they work with professionals to conduct their business and if you start your own work with professionals, get financial advise and mentoring from the National Association of Stokvels South Africa (Nassa).

“I always say the best stokvel to join is the one you start. Because stokvels are about people, you are the one who knows your people. You know which ones have the same vision, you know who are in the same income affordability and who share the certain goal that you want to achieve,” she said.

Her parting advice was  for you  to introduce financial education to your children gradually, perhaps while doing  homework with them. Start with the lesson that money does run out.

Lengolo gave the example of a friend allowing her child to have her own money and using it to buy the things she wanted from the store. When eventually the coins ran out, the child was then able to understand that money does indeed run out. This helps your child understand how to monitor their spending, she says.​ 

If you'd like to talk to reach out to Palesa Lengolo her direct email is : palesa@palengsholdings.co.za

Her book is available as follows:

During lockdown her eBook is available on Amazon

Hard copy available at any book store, Exclusive books, Bargain Books, Readers Wearhouse, loot, Takealot natiowide.