Johannesburg – Stokvels are an important part of the South African savings culture.
Historically, stokvels were one of the few ways that people were able to help each other to save and improve everyone’s financial well-being.
Many stokvels still operate in the traditional way – a group of people meets every month, each member puts an agreed amount of money on the table, and one person, on a rotational basis, takes that lump sum and uses it to make an important purchase.
It’s a way of helping one another buy the things that improve our lives in a world where it’s all too easy to spend on basics and essentials every month.
At the root of the stokvel concept is a discipline of saving, of putting some money aside that otherwise gets frittered away.
To this day, many stokvels hold the emergency fund portion in cash.
One member is entrusted to look after the old Bakers Biscuits tin and keep it hidden.
This principle of trust is central to many to stokvels.
The stokvel members have to trust one another to all make the monthly payments, and one or two elected people have to be trusted to act as custodians of the fund.
Biscuit tin alternatives
There are two main disadvantages to keeping cash in a tin:
• The money can be stolen or lost in some other way.
• The cash in the tin loses value over time because of inflation.
Inflation is more insidious than many people realise.
If prices go up 6% a year, in 10 years your money loses nearly half its buying power – R100 is worth only R56 after a decade of 6% inflation.
Understanding that money can grow if it’s invested, many stokvels open savings accounts at banks and deposit each month’s cash.
By Nicolas Oldert
•Oldert is an investment specialist at Franc.
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