Wise up. Spend your Stokvel Payout Sensibly

According to the National Stokvel Association of South Africa, there are 800 000 stokvel groups in the country worth an estimated R49 billion.

What is a Stokvel?

Stokvels have been in existence for many years and are a common informal savings tool used across South Africa in which members contribute a fixed amount of money at regular intervals, usually on a rotational basis, as agreed to by the members – often during the December Festive or April Easter holidays. The members are free to choose how they spend their money.

While a spending spree might be the first thing that comes to mind, using the money wisely is advisable. Tessa Verwoerdt, HOD Money Solutions Centre at Bayport South Africa says that this additional income is extremely welcome for what is often a very long month to the next pay day and that recipients should combine financial planning and responsible spending with a little bit of spoiling.

Bayport offers sound advice on how to maximise a stokvel pay out:

• Don’t blow the entire amount and have very little to show for it.
• Seek sound financial advice from a reputable financial institution to help plan how to best utilise this pay-out.
• Pay off credit debt or settle outstanding personal loan. Paying what you owe ahead of time not only reduces a financial burden but also goes some way to improving your credit score. Pay the account you are closest to settling or pay the debt with the highest interest rate.
• Consider putting extra money into your bond repayments to help you save on interest
• Save some of the pay out for a rainy day – it’s crucial to have an emergency fund. Emergencies happen, always unexpectedly so it’s wise to have something to fall back on when a difficult situation arises, be it repairs to a leaking roof or an unexpected medical emergency.
• Invest in education or retirement .
• Start a specific savings fund or policy or pay a lump sum into an existing account.

There’s no harm in spoiling yourself, but be financially savvy about your spending choices: shop smarter by looking for discounts or added-value opportunities and consider taking a Sho’t Left holiday and explore Mzansi instead of blowing the budget on a Dubai shopping spree over the holiday.

“A stokvel pay-out is the result of many months of responsible saving so use your hard-earned cash wisely and start off the new year on a more financially secure footing,” Tessa concludes.