South Africa has a notoriously bad savings culture – in fact, with a household saving ratio of -0.50 percent according to Statistics SA, we have the lowest personal savings rate in the world. It is critical to change that and cultivate a nation that believes in putting money away, but it can be a challenge when many South Africans battle to survive from one month to the next.
However, there is at least one way that South Africans across the spectrum have been saving that goes back well over a hundred years and that has the power to improve financial security and drive a culture of saving: stokvels. Although originally used as an informal saving mechanism by groups of people pooling their money to save for a common cause such as a funeral, for groceries over the festive season, for household appliances or costs or even to go on holiday, stokvels have since grown into a major force in the country, with the National Stokvel Association of South Africa reporting over 800 000 active stokvels in the country worth an estimated R49 billion.
The sheer size of the stokvel economy illustrates its potential to drive financial growth and build a healthier approach to savings. This is largely because saving in a group cuts across gender, age and even class structures amongst South African communities – and the fact that stokvel members are all pursuing a collective goal means that there is a greater commitment to saving and meeting monthly obligations.
Not only do stokvels effectively make saving easier, more fun and less complicated because groups of like-minded people act as a support network and can offer advice, they additionally provide greater levels of security by allowing people to stay out of debt and effectively break the cycle of poverty. In recognising the important role that stokvels play, banks started offering products and services that would enhance those savings and bring more South Africans into the formal financial fold in order to enable them to achieve their financial objectives.
One of the important ways that stokvels are able to do that is by teaching young entrepreneurs with ambitions of opening their own businesses that it is in their reach. Stokvels empower people to be proactive in the management of their own money and have a say in what is done with their savings and investments. Many stokvels invest their money in longer term products such as property or a business venture, and then use the returns to start their own business.
By allowing flexibility in where members can invest their savings, as well as offering trusted advice and support, stokvels are increasingly viable ways for young South Africans to empower themselves in terms of shaping their relationships with money. Showing what can be achieved through savvy and secure savings and investments may only be the first step in starting to build a country of ‘savers’ – but it is undoubtedly one of the most critical in allowing millions more South Africans to realise their dreams by learning how to manage their own money more effectively.
Disclaimer: The advice contained on this blog is for general purposes only and does not take into account individual circumstances, objectives or financial needs. Accordingly, readers are advised to seek appropriate advice from licensed professionals prior to making any investment, or taking up a financial product or service.