As the festive season draws closer, top of mind for South Africans is whether they have enough savings to meet the financial demands that come with this period. A way in which many South Africans prepare for the period is through the popular stokvel savings vehicle.
However, the stokvel’s have on occasion unfairly attracted negative stories of members disappearing with money when it’s time to divide savings within the group. A rules-based savings scheme, with the assistance of your bank can avoid these potential situations, Mike Ramolahlehi, Product Manager, Savings & Investments at Standard Bank offers insights on how people can make use of the stokvel savings vehicle through a bank.
Ramolahlehi says that people need to exercise discretion when making decisions about their hard-earned money, and that reputable institutions such as banks, have a variety of stokvel savings formats which offer peace of mind and security for groups who are saving towards a common goal.
South Africans are currently caught in the frenzy of the increasingly infamous WhatsApp and illegal savings scheme, where a lot of members have complained about not getting their money. Although these types of schemes are very popular, they are Ponzi schemes and therefore illegal and there is very high uncertainty when it comes to members receiving their money following initial investment.
According to Ramolahlehi, the benefits of saving as a group through a bank include:
- Dual authorisation from selected signatories is required in order to realise funds
- The necessary compliance checks are conducted on authorised signatories before account can be opened.
- Saving more money faster when you pool your savings from as little as R100 a month into one account.
- Most stokvel-styled savings products allow funds to be deposited or withdrawn at any time with increasing benefits for you and your scheme.
- Once a desired amount has been reached, the money can be moved into longer term investments, growing the initial investment even faster.
- Higher interest for individuals because the group is saving together.
“It can be very tempting to resort to popular but risky schemes in order to quickly bolster your savings. It is far more advisable rather, that people contact registered financial institutions for any credible information pertaining to savings”, concludes Ramolahlehi.
Stokvels harness the miracle that is compound interest, where investors earn a return on their savings as well as their accumulated interest.