Insights categories - Personal investing
Personal investing

How to protect and grow your Stokvel

Saving is often the last thing on our minds when we have extra money and can seem daunting. But have you considered investing as part of a group? Globally various informal social savings clubs exist and have proven to help encourage saving in these countries, proving that mutual commitment can help in achieving your goals.

July is savings month in South Africa, the perfect time to bed down some of those good intentions to save.

Creating a savings habit involves commitment and patience to make your money work for you. Sometimes saving towards a common goal as a group of friends or as a family can help you remain disciplined as you have others to hold you accountable.

The number of trust-based savings clubs has increased, with ‘Stokvel’ savings representing an estimated R49 billion. A Stokvel is a savings or investment society to which members regularly contribute an agreed amount and have a common savings goal. This form of saving works for many people as the group commitment helps to keep them on track: everyone is on the journey together.

Many savings clubs keep their savings in cash or in the bank where they earn below-inflation returns. The old adage ‘cash is king’, does not always hold true. Having your money invested in a combination of assets that have the potential to grow in value over time can give you higher returns on your investment.

When you put your money away, you want to know that it is safe and that you can access it when you need it. One of the ways to transform your savings or investment club is by investing in unit trusts. There are different kinds of unit trusts with different mandates and objectives. A good solution for many investors is a balanced fund, which provides access to a variety of asset classes such as shares, property and bonds. You can choose a unit trust whose investment objective is in line with the objective of your club.

Five benefits of investing in a unit trust as a club:

  1. Your investment decisions are in the hands of skilled investment managers
  2. Your investment has the potential to grow higher than inflation
  3. Your investment is safe as you are not invested in the investment company itself but in a separate unit trust that is safe from the company’s creditors
  4. You can access your statements online and have transparent reporting for your savings club
  5. You can access your investment when you need to

If you need further information about unit trusts, you can get more information through the websites of reputable investment managers. To find out which unit trust would be most suitable for your Stokvel, you may wish to speak to an independent financial adviser.

In the words of Martin Luther King Jnr: ‘You don’t have to see the whole staircase, just take the first step.’

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