It’s that time of the year when stokvel clubs share their accumulated funds among their members, giving millions of South Africans a December bonus or “13th cheque”.
While a spending spree might be the first thing that comes to mind, using the money wisely is advisable. This additional income is extremely welcome for what is often a very long month to the next pay day. Recipients should combine financial planning and responsible spending with a little bit of spoiling.
According to the National Stokvel Association of South Africa, there are 800 000 stokvel groups in the country, worth an estimated R49 billion. Stokvels have been in existence for many years and are a common informal savings tool used across South Africa.
Instead of getting caught up in the excitement and buzz of the festive season by splurging on gifts, often buying unnecessary items, temper the indulgence with some sound financial planning.
Don’t blow the entire amount and have very little to show for it. Spoil yourself or your family but also consider that stokvel payouts have enabled families to buy groceries during the festive season and can help pay school fees in January.
How to maximise a stokvel payout:
First off, seek sound financial advice from a reputable financial institution to help plan how to best utilise this payout. This may involve paying off debt, for example putting extra money into your bond repayments, paying off credit debt or settling an outstanding loan. By paying off debt, you will save on interest being added every month. A good tip is to pay the account you are closest to settling or pay the debt with the highest interest rate. Paying what you owe ahead of time not only reduces a financial burden but also goes some way to improving your credit score.
Save some of the payout 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 and either 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 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.
A stokvel payout 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 Verwoerdt is the HOD Money Solutions Centre at Bayport South Africa.