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There has been an explosion of growth in informal sector savings over the last six years with stokvels the most common form of informal savings in South Africa.
The growth in the number of working black metropolitan households saving in stokvels in 2016 has risen to 59%, up 14% in 2014. This is according to the latest figures released by the Old Mutual Savings and Investment Monitor (OMSIM).
Known as the “hidden economy”, stokvels continue to be on the rise and the National Stokvel Association of South Africa (NASASA) estimates that there are over 800 000 stokvel groups in South Africa and collectively about R49 billion a year is saved through them.
Stokvels are community-based organisations, where the individuals get together with the common purpose of pooling their financial resources. People use stokvels to save, buy groceries and pay for funeral costs and services, while at the same time it is a platform for social gatherings.
Another 2016 OMSIM statistic points out that 88% of informal savers are black.
A key benefit of stokvels is that they effectively encourage people to save money each month. Saving money as a group offers discipline unlike saving money in a savings account, where there is a higher temptation to use the money when you need to.
An active stokvel saver says she belongs to two stokvels – one for savings and the other for groceries at the end of the year. “This means I don’t have to worry about an excessive grocery bill during the December holidays and the saving stokvel will help me with emergencies that require R5 000 or more in case I need it, or otherwise it just accumulates.”
Another stokvel member receives one payout in her birthday month which she describes as “my birthday present to myself.” The other payout is in January and it helps her cope with the extra expenses associated with the beginning of the year.
The reference to stokvels as informal savings and investments schemes may be misleading. They tend to be well organised with self-regulating rules and norms, often set out in constitutions. Funds may also be deposited into the bank account of a formal banking institution.
What the 2016 OMSIM findings highlight once again is the urgent need for greater financial knowledge and understanding in South Africa where only12% of respondents indicated that they would use a financial adviser as a source of financial education.
The main reason quoted for not consulting a financial adviser was the belief that they did not have enough money.
However, saving in a stokvel can form part of an overall savings portfolio which should provide goals for saving for your child’s education, life assurance to protect you and your family’s future in the form of life and disability cover and retirement funding.
For individuals to achieve their financial goals and to retire with enough funds, you need a financial plan that keeps track with your needs as you move through the different life stages.
Getting advice from a registered financial planner is a good starting point and will help you to assess your current financial situation, identify shortfalls and plan appropriately for the future.
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