It's become very important for stokvels to seek out investment vehicles that cater to the varied nature of the group's saving goals — and this sometimes requires more than a plain old savings account.
"Stokvels have progressed in both the way their role is perceived and in the way they operate," said Ntombi Tisani, head of marketing at Old Mutual personal finance. "While they continue to play a key role in our communities, the arrangement of stokvels is increasingly reflective of changing social dynamics. These include expanded definitions of stokvels as hubs for socialising, helping to reduce costs, realising shared goals like savings for holiday travel, building commitment and spreading financial education."
This is why it's become important for the estimated R45-billion industry to have financial solutions designed for each stokvel's needs or group savings goals.
"The increasing buying power and growing stokvel footprint empowers members to demand more from service providers, including financial education, advice and platforms that will grow the stokvel and enrich the overall experience," said Tisani, "but it's imperative that members do their homework and ensure their stokvel solution is efficiently structured and geared for growth," she added.
Here are her top tips for investing stokvel money wisely:
1. Benefit from tax-efficient solutions
The South African government encourages saving by offering tax benefits on certain investments. This great opportunity for growth is often missed by stokvels. When deciding which savings or investment to use for your group's contributions, remember to consider tax-efficient solutions like tax-free savings accounts.
2. Prioritise returns
Prioritising returns is as important as encouraging savings. Members need to get more out of their investments, otherwise they may as well be saving their money under a mattress with no opportunity for growth. So seeking an investment vehicle with high returns, or one that offers competitive interest rates, is important.
Also, remember that the cost of debt increases over time. So, for example, if you save R1,500 every month to pay off a debt of R18,000 at the end of the year, you need a savings mechanism that yields enough in interest to match the accumulated interest of the debt at repayment. Similarly, if you are saving for a rainy day, you need to be aware of inflation rates, increasing costs of living and any VAT reforms to ensure that you are saving enough.
3. Seek investments with value-added benefits
Also seek out a specific investment solution that offers value-added benefits that empower members through, for example, financial education. Apart from being simple, transparent, cost efficient and flexible, financial solutions also need to add value to members. There are products, for example, that also offer much-needed guidance in the form of educational workshops and support — enquire about these before you invest your money.
4. Get the right advice
When it comes to money — your own or your stokvel's — it's important to get the right advice to ensure you're on track to achieve your goals. The financial knowledge and experience of your co-members may vary a lot, which could make it difficult to agree on the right savings strategy and select appropriate solutions. A qualified financial adviser can help you put a targeted plan in place that meets the needs of all the members of the stokvel.