Johannesburg- For generations, community-driven stokvels have met the money needs of their members by opening access to funding for everything from funerals to school fees.
It is estimated that more than 11 million South Africans use stokvels to save more than R5o-billion. But how does this translate into real wealth?
Tinashe Kunaka from Allan Gray helps us unpack the topic of using savings clubs to build wealth.
“What we have observed from stokvels is that shared accountability can be incredibly useful to help investors stay the course and realise their goals. In addition, by pooling their skills and resources, savings club members are able to make large investments that may otherwise be unattainable and share the risk that comes with any investment,” Kunaka said.
He provides the following advice to stokvels on where to invest in instead of just sharing the money for non-investment purposes:
- Invest in unit trusts
Unit trusts offer investors easy, affordable access to financial markets. There are different unit trusts available that are suitable for different needs, objectives and time frames.
When a savings club invests in a unit trust, the money is pooled with that of other investors. This money is then used by an investment manager to buy shares, property, bonds, cash or a combination of these assets, in local or foreign markets, on behalf of investors.
- Set up your savings club for investment success
Savings clubs rely on a high degree of trust, dedication and transparency. Investing is a long-term journey. Therefore, it is important that members share the same vision and level of commitment. There are a few things you can do, if you are not doing them already, to lay the foundation for successful outcomes.
He also advises stokvels to be more professional in how they manage their affairs.
They can do this by doing the following:
- Draw up a constitution: This is the founding document of your savings club. It should detail the club’s purpose, rules and regulations and provide guidance for dealing with a wide range of scenarios, including what happens when a member resigns, defaults or passes away.
- Choose your members wisely: Running a successful savings club requires good leadership and a culture of trust. It is important to make sure that all members share similar values so that you can overcome disagreements as they arise.
- Formalise your club: It is a good idea to formalise your savings club’s operations by consolidating your documentation and opening a bank account in the name of the club. You should appoint capable members to oversee the club’s
finances and administration, and detail these roles and responsibilities in the club’s constitution.
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