Stokvels are an increasingly popular form of saving in South Africa. According to the National Stokvel Association, there are over 800 000 stokvels registered in the country, with a total membership of 11.4 million people. And when it comes to assets, they are valued at over R44 billion.

That’s a lot of money being handled by informal groups, which is why I believe that the fundamental pillar of any stokvel is trust. Interestingly, though, most stokvel groups are made up of friends and colleagues instead of family or couples.

Does this mean most of us trust our friends and colleagues more than we trust our families or partners? It’s true that some people believe that money and family do not mix.

In my experience as a financial education advocate, I’ve seen that the cause of most misunderstandings involving money is a lack of communication. Families and couples need to talk more about money and understand each other’s relationships, aspirations and beliefs around the subject.

Where trust comes into the picture

A family stokvel can be very beneficial to its members, but trust is key.

Think of it this way: before you buy something, you must trust that it is worth more to you than what you will have to pay for it. This is the psychological reasoning that takes place before we purchase anything.

Think of the last item you bought; the marketing did enough to make you trust that you will win more (status, convenience, enjoyment) than you will lose (money).

Stokvels are no different. You have to trust that the amount you put in every month will contribute to a greater reward.

If you want to start a family stokvel or join one with your partner, answering the following questions might help:

• Have you ever thought of your family as a brand?
• Do you trust your family members?
• Do you believe that they can help you reach financial well-being?
• Is your spouse the right partner to travel this financial journey with?

If you answered ‘no’ to any of these, therein lies your challenge.

But before you judge family members or a partner too quickly or harshly, reflect on your personal brand when it comes to how you yourself handle money and your financial health. Perhaps youare the obstacle.

Planting trees for future generations

If your vision is for a year, plant wheat; if your vision is for a decade, plant trees; and if your vision is for a lifetime, plant people.

To be progressive, your stokvel must have a strong vision that addresses short-term issues, medium- and long-term goals, generational aspirations and legacy. A worthwhile family vision will cultivate healthy and fertile soil for growing your money.

Family members need to trust each other and the vision for their stovel because the initial contributions will be a sacrifice during the planting stage. Then, for a while, it will look as if nothing is happening while the roots become stronger.

After some time, the plants will break through the soil and start to grow. This is when your family must decide if they are going to harvest the crop and split the money, or if you want to go further and grow a tree.

Most stokvel members think of their money like wheat – this is disappointing since they have shown discipline to plant and grow for a year, but then harvest everything and have to start over the following year.

Examples include grocery, bonus, travel, birthday and savings stokvels that have 12-month cycles.

A family stokvel that wants to plant a tree will save the money for a longer time to build something that will become an income stream for the family in the future. Examples are investment and property stokvels that take a longer-term view in investing the money and building stokvel assets.Other less common but equally good ways to use a family stokvel to build family wealth include:

• a borrowing facility that extends loans to family members at low interest rates;
• a purchase order facility that gives business loans to family members who have a purchase order;
• an investment fund, using pooled resources to access investment vehicles with better potential returns and lower fees;
• venture capital – giving money to family members who want to grow their business, provided that it’s operating and not just a business idea, or starting a family business or side hustle together, pooling the skills, education and networks in the family;
• a hand-up fund to use so-called Black tax contributions for developmental purposes, especially for younger family members. For example, the family stokvel could pay for student registration, a driver’s licence, tutoring or extra lessons to improve matric results;
• a legacy fund that pays the life cover of elder members after they have retired or resigned. Instead of stopping their life-cover payments because they no longer have an income, and letting all their contributions go to waste, you could agree to pay the monthly premiums and collaborate on how the payout will be used for the betterment of the family when the member dies. This arrangement will allow them to leave a legacy.

Send your retirement and other money-related questions to todayomc@oldmutual.com.