When some young people hear the words "stokvel", they immediately start thinking of an outdated system used by our grannies to buy groceries, raise funds or bury loved ones. Yet young people harness co-operative financial power all the time.
I was recently at a club and watched a group of my peers nervously studying their bill. One of them whipped out their phone and started making calculations. It was Algebra at its best. After the imbizo of calculations and divisions was held, everybody starting opening their wallets and purses. Some had hard cash and others debit cards. Soon the bill was paid and they left.
It dawned upon me that as individuals they couldn't have afforded the bill, but as a collective they could. There is massive power in putting the incomes of multiple people together.
Imagine if this group had used this co-operative financial power to buy shares, a property or build capital?
That is what a stokvel is; a co-operative financial effort that is made by a group of people with the same goals. It's an informal savings vehicle that consists of members' pooled contributions. According to the National Stokvel Association of South Africa(NASASA), the stokvel industry is worth an estimated R49 billion, with 11.5 million people participating in 800 000 stokvels across the country. It's clear that starting or joining a stokvel is a solution for those who can't afford the monthly investment minimums, yet want to earn long-term returns on their savings.
This may also apply to those that find the traditional forms of saving too challenging.
As millennials we don't have to follow the traditional format of stokvels. We can customize the system using technology.
User friendly apps like StokFella make it very easy to start and manage a stokvel. This app digitally carries the burden of managing and communicating a stokvels activities on your smartphone. Added benefits of Stokfella allow individuals from different parts of the country to form and run their stokvels with no geographical boundaries. Furthermore, platforms like the NASASA offer access to valuable information, services, opportunities and products to assist you in the creation of your stokvel.
If we want to build wealth as millennials, than we must consider every avenue, and stokvels presents an interesting option. These are some things to consider when starting a stokvel:
- Form a group of likeminded individuals who share the same goals as you. Agree on the number of members, contribution amounts and dates of payments.
- Do some consultation and research to decide on a format of the group and the tax implications of each option. The goals of the group will streer this decision. This could be an investment club.
- Divide the responsibilities of the stokvel, ensuring that everyone is bringing their unique skills or talents to the table.
- Formalize the stokvel with a constitution which you can get from the NASASA website. Trust and discipline is key.
- Employ a qualified financial advisor who can help the stokvel or investment group to make decisions that are in the best interest of all members.
Alternatively you could simply join an existing stokvel.
If you can meet up with friends at the club to party and split bills, why can't you meet up to create a stokvel or investment club? The potential of co-operative financial power is too high to ignore. This power can be harnessed.
I recently heard a story about 8 friends, who bought 8 houses in 8 years. They created a stokvel in which each member contributed R10 000 a month. This amounted to R80 000 a month and R960 000 a year. After each year the stokvel bought a house to co-own until there were 8 houses in total. So essentially, each member has bought their house in cash without the 20 year period bond that comes with interest.
It's possible, start small and harness the co-operative power of stokvels.