Saving as a group

When we don't contribute to the group savings, we are letting other people down, not just ourselves. It is a lot more difficult to explain to your group why you felt it necessary to buy a new mobile phone than contribute to the club that month.

Research shows that despite the recession and job losses, savings clubs reported an increase in the level of savings while other forms of savings declined.

Popular across all levels of income

Around one-third of South Africans save through a savings club and they are popular across all levels of income, with 30 percent of high-income earners saving in groups.

Savings clubs can take a variety of forms. It can be the traditional stokvel, in which a group of people save for end-of-year expenses and use their buying power to purchase goods in bulk, or it can be a group of friends saving for a special holiday.

Investment clubs, which invest in long-term investments like unit trusts or share portfolios, are becoming popular. A unit trust allows for multiple beneficiaries and a group can select a fund that meets their investment needs, from a money market unit trust to a high-equity fund.

An investment club can invest in a share portfolio using online share trading, in which case it may be prudent to set up a trust for the portfolio to deal with issues of ownership.

A group of like-minded people

The best way to set up your savings club is with a group of like-minded people who are at similar stages of life with similar goals. For example, you may be a group of young professional women or a group of retired men.

The idea behind an investment club is to learn about investing through sharing research and investment ideas and is made of only around 10 members.

Be wary of joining existing investment clubs unless you know the people well as there are get-rich-quick schemes masquerading as investment clubs, which promise to show you the "secrets" of investing. If you have to pay a significant joining fee or if the club promises above market return, this should raise a red flag.

Apart from the motivation factor, investment clubs offer several benefits:

• Investment clubs are able to reduce fees by saving in bulk and negotiating a discount
  
• The club uses the knowledge of all the members when choosing a unit trust or share
  
• Members can conduct research on different types of investments and give feedback to the group
  
• By pooling resources, members gain access to investments that may not be available to individuals, such as property or BEE investment opportunities.

Learn about something new

A savings club is also an opportunity to educate yourself on finances. Use your combined resources to learn about something new. Whether you are running a basic stokvel or an investment club that has its own share portfolio, use the opportunity to improve your knowledge of your personal finances.

• Bring interesting articles to discuss at each meeting. This can be anything from investing in property to how to get the most from your medical aid.
  
• Set goals for the next meeting, like writing up your own personal budgets or sorting out your life insurance. Discuss your experience with the group; you can learn from each other.
  
• You may not feel comfortable talking about the full extent of your debt, but discussing the challenges and learning from each other can really motivate you. All the members can set a goal, like paying off their store cards by the end of the year. Report each month on how you are doing and the challenges you have come across. Knowing that you have to report back to your friends will motivate you to spend your money wisely.
  
• Talk to each other about ways you have found to save money. Take tips from articles you have read and set challenges for each other to see where you are overspending.
  
• Find out about presentations and talks that are being held on financial topics. If you are investing through a financial institution, ask them if they run courses or workshops that you can attend.
  
• Ask your financial adviser to come to talk to you about retirement planning or how to write up a will.

Questions to ask

Once you have agreed to start a savings club, you need to write up an agreement which addresses these questions:

• What is the purpose of the club?
  
• Where will you invest?
  
• How much will each person contribute? How often will you meet?
  
• What happens if someone stops contributing or needs to cash-in early? Here, for example, another member could have the option to buy up the ex-member's portion of the investment.
  
• Where will the account be held?
  
• Who will be the signatories? It is important that you open an account to hold the funds where there are at least two signatories required.
  
• Who will be treasurer and chairman? Choose a treasurer who will keep track of the investments and manage the books as well as a chairman who can convene the meetings. These roles can be changed every year.

Remember, your financial adviser can help you make the most of your finances by helping you develop a financial plan that suits your circumstances and making sure that you stay on track with your finances.