What is a Saving Circle?

Every time, we think about friends we generally think about going out or hanging out together. Most activities revolve around spending money. We rarely talked about savings together. That is because we are very protective when it comes to our personal finances. In addition, trusting people with our money is challenging. Nevertheless, co-saving is a powerful tool to reach our goals, whether we want to buy a house, or even to pay for college. Also, it helps people reach common group goals such as birthday gift, or any major collective projects.

Takeaways: What is a Saving Circle?

Saving circles also known as co-saving is a century old mechanism. It is a  common practice in societies without easy access to banking. Researchers and scholars called it rotating savings and credit associations.

Takeaways: How does it work?

This a collective mechanism to save with a group without having a bank account or getting into more debts. The total amount collected belongs to the entire group members.

Typically, a group of people will come together and decides to improve their lives.

 Steps guide to set up a saving circle: Before

a. Find like-minded people

There is no required number. The key here is like minded people make sure you are all on the same page with the same vision, the same values, and objective in life. Also verify the financial aspect to make sure they can afford the monthly, quarterly, or weekly contribution.

As a recommendation, I will keep it under 12 and set weekly or monthly contributions.

b. Draft a constitution

A constitution is a set of rule that everyone abides by. This is a critical component because you are not just juxtaposing people but you are setting up a lifestyle. Those rules will govern how you guys operate it includes meeting time, contribution amount, meeting period, the profile of members, how to set up contribution, how to distribute money, what to do with the money, how the account will be managed, etc…

As a recommendation, set a steering committee of 3 can draft the initial paper that will be presented to all for collective editing and finalization.  Then a legal advice to ink everything.

c. Legal framework

It is important to acknowledge that a saving circle is an agreement between a group of people to execute certain operations. Consequently, it has to be enforced with a legal framework. That is why all members have to assert and accept the rules and regulations that govern the activities. If any member Fail to meet its obligations they will be sanction.

Always get assistance from a lawyer or an experienced person to avoid any disputes. The legal professional will review the constitution to make sure its meet local, state and federal requirements.

Steps guide to set up a saving circle: During

d. Meeting period

You have to set up a time when you all come together for meeting and to discuss all issues related to the organizations. You can share ideas on what to do with the fund or share your current issues. The quality of the encounter is enhanced by making it enjoyable with some social activities. In addition, if the entire saving period is 12 months, everything ends after 12 months. Thus the entire fund plus the interest generated is shared equally among all members.

I will recommend meeting once a month. Then you will have more to share and talk about. The meeting is rotative and hosted by each member.

e. Contribution

The contribution aspect of is the reason why you came together. Every time you meet everybody chips in his contribution. One person can contribute twice if their wish. as an illustration, if you decide to meet every month then every month be prepared to contribute the amount predefined. Then the host gets a chance to take all the money contributed that day minus a retained amount of maybe 1% to 5%. Or you can decide to just keep contributing and to divide the money equally at the end of the circle.

Steps guide to set up a saving circle: After

f. Dissolution

Actually, a saving circle is set for a specific period of time. A dissolution is recommended after you reach the set time. Equally, that leads to interest distribution among all members. However, you can decide to continue as a common agreement.

Before starting the dissolution process, you have to make sure everyone is on board and that’s the direction the majority of members are comfortable. Some saving circles are so well managed that the amount generated as interest made the members millionaires.

Advantages of a Saving Circle

  • Provide monetary access for people with no access to the traditional banking system.

All circles help a lot of people by providing them access to financial security and stability. The money they make can easily be stored in the organization bank account. Typically there is a person that walks around to request for contributions.

  • Access to cheap money

Being part of a saving circle is a great way to save money for any goal. In addition, the money saves if well managed could be placed by all members toward a high-interest rate yielding account.

  • Goals

Usually because of this method members can plan ahead and project them in the future with goals. It could be short term, mid-term and even long term. It is all about planning and joining the right organization. More importantly setting yourself specific goals to achieve, sharing with members so they can keep you on track.

  • Accountability

It is probably the most critical attribute of any circle. In fact, during the evaluation process, the assertion always starts with a thorough accountability assessment. Consequently, they will check every important aspect of your life. To confirm you have a high level of accountability. Most likely the only way to join an organization is by referrals,

In conclusion

Saving circles might not be for everyone, but it is certainly one of the most effective to reach your financial goal. Today with modern technology more online options are available to ease the process. Apps like https://twine.com or https://www.tandasavings.com are the latest way to save together with partners, family, friends or even strangers.



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Tech,music lover and community freak. I constantly reinvent myself by embracing new challenges every day and everywhere. I founded edulers because it takes a village to build an entire community of learners. By sharing your story, you can help others avoid the same mistakes and do better. #The learning Journey of thousands

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