If you’re South African, chances are you have heard of a stokvel before.
Heck, you might even be part of one.
Are you curious about how these SA community savings groups work?
Let’s dive in.
What is a stokvel?
A stokvel is a community-based savings group. Each person puts in a set amount regularly, like every week or month, and members take turns receiving the full amount collected. Stokvels are very popular in South Africa and are based on trust and shared goals. People use them to save for things like funerals, holidays, or business ideas.
There are three types, traditional stokvels, bank-managed stokvels, and digital stokvels—all of which work a little differently, but the idea remains the same…
Group members decide how much to contribute when payouts happen and how the money should be used, making it an organized and supportive way to save.
If you’re like me, you might be wondering which type of stokvel is the best, or whether using a stokvel is a good idea at all. Those are good questions to ask.
Stick with us—we’ll get to that.
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Stokvel categories
Stokvels can be grouped into three main categories:
- Informal stokvels (traditional stokvels)
- Bank-managed stokvels
- Digital/online stokvels
Let’s break down each one so you can see which fits your financial goals best.
Informal stokvels (traditional stokvels)
Informal stokvels are the most common type and are an important part of many South African communities. They are usually run by groups of friends, family, or community members who trust each other and share the same financial goals. Everyone contributes money regularly—this could be every week, two weeks, or month. The money is then paid out to members in turns or saved for a specific reason, like covering funeral costs or buying supplies for the festive season.
Types of stokvels (traditional stokvels)
Within traditional stokvels, there are several variations, each serving a different purpose:
- Savings stokvels: Members put in money regularly, and the full amount is given to each member in turns or saved for a certain period.
- Grocery stokvels: Members combine their money to buy groceries in bulk, usually at the end of the year, which helps save on household costs. (Check out our grocery list hacks.)
- Burial societies: These stokvels help cover funeral expenses and provide financial and emotional support to members during difficult times.
- Investment stokvels: Members pool their money to invest in businesses, property, or shares with the goal of making a profit.
- Loan stokvels: Members can borrow money from the group and agree to pay it back with interest. The interest collected is then shared among the group.
That’s how it all began. Since then, banks and apps have introduced a modern way to participate in stokvels.
Bank-managed stokvels
Bank-managed stokvels are formal savings groups run by banks. Big South African banks like FNB, Nedbank, and Absa offer special stokvel accounts that help keep your money safe, earn interest, and make saving easier. These accounts often come with extra benefits, like free funeral cover, discounts on services, or better interest rates, depending on the bank.
They also provide transparency, meaning all transactions are recorded, and members can easily check the account details.
It’s like having all the perks of a stokvel, with the added peace of mind and security.
Digital/online stokvels
Digital stokvels operate through apps or online platforms, offering convenience, transparency, and easy tracking of contributions. Apps like StokFella allow members to manage funds digitally while still fostering the sense of community that traditional stokvels are known for. Adding the benefit of transparency and secure, regulated systems.
Think of it as a stokvel for the digital age—same concept, just way more convenient.
What is your estimate? *The calculation is an estimate actual amounts may vary. What is your estimate? *The calculation is an estimate actual amounts may vary.
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How does a stokvel work?
A stokvel works by having members contribute a fixed amount of money regularly—this could be every week, two weeks, or month—into a shared fund. The total money collected is then distributed based on agreed rules, like taking turns to get the payout, saving for a special event, or keeping funds for emergencies. Each member receives a lump sum when it’s their turn. Stokvels are built on trust, with members following agreed rules for contributions, payouts, and how the money is managed.
How a stokvel works:
- Members pay in a fixed amount
- Contributions are pooled into a shared fund
- The group agrees on the rules that members must follow
- Funds are distributed on a rotating basis
- Each member receives a lump sum when it is their turn
- The funds are managed and tracked responsibly by the group
Basically, you contribute regularly, and when it’s your turn, you get the payout.
Here’s an example.
Stokvel example
Imagine 10 coworkers start a savings stokvel. Each person puts in R1,000 every month, creating a R10,000 pool. One member gets the full amount each month until everyone has received a payout. This money can help with school fees, home repairs, or paying off debt.
In a grocery stokvel, members would save monthly and use the money at the end of the year to buy groceries in bulk, helping cut costs and stock up for the festive season.
It’s like getting a financial boost exactly when you need it most.
Now that we know how it works, let’s answer the question, “Is it a good idea to join a stokvel?”
Starting with the pros and cons.
Advantages and disadvantages
Advantages of stokvels
- ✅ Community support: Stokvels create a sense of belonging and help members support each other.
- ✅ Saving discipline: Regular contributions encourage good saving habits.
- ✅ Access to lump sums: Members can receive large payouts that might be hard to save on their own.
- ✅ Low or no fees: Stokvels usually have little to no extra costs compared to formal savings options.
- ✅ Financial learning: Members often learn about money management through participation.
It’s not just about saving—it’s about learning, supporting, and growing together.
Disadvantages of stokvels
- ❌ Risk of mismanagement: Informal stokvels rely on trust, and poor leadership can lead to money being poorly handled.
- ❌ No interest earnings: Unlike bank savings accounts, some stokvels don’t earn interest.
- ❌ Limited legal protection: If a member doesn’t pay or misuses funds, it can be hard to take legal action.
- ❌ Group dependency: A stokvel only works well if all members keep their promises and make their payments.
Stokvels have several advantages. Some people really benefit from saving in a community. But the disadvantages stand out. Especially the fact that stokvels don’t earn interest.
Saving shouldn’t be about just putting money away. Savings should earn interest and grow over time.
If you’re confident in your own ability to save regularly and manage the money. Try these alternatives instead.
Stokvel alternatives
While stokvels are a popular and effective way to save, there are other financial options in South Africa that offer similar benefits with different levels of security:
- Fixed deposit accounts: Banks offer these accounts where you invest a lump sum for a set time and earn higher interest than regular savings accounts.
- Savings accounts: A safe way to save money at a bank while earning interest, though usually less than stokvel payouts.
- Unit trusts: A fund where many people invest together, and experts manage the money to help it grow.
- Retirement annuities: A long-term savings plan that offers tax benefits and helps you save for retirement.
- Money market accounts: Good for short-term savings, offering competitive interest rates and easy access to your money.
Check out our post on “how to invest money in South Africa” if you really want to make your money grow. If investing sounds too advanced, start with a savings challenge or a monthly savings plan instead.
Final thoughts
In the end, stokvels show that saving doesn’t have to be something you do alone. They can help you work toward your financial goals with support from a group. But while stokvels are helpful, they might not be the best way to grow your money.
Other options, like savings accounts, fixed deposits, or investments, can offer better protection AND help you earn interest on your savings.
If you want to take care of your debt to make your money go further. Talk to someone on our team at My Debt Hero. We specialise in helping South Africans with their debt.
