What exactly are savings clubs and can they help you save money easier? Well, they certainly work for me! For a long time, I struggled to save money. I was always tempted to buy a new jacket or go out for dinner.
At the end of the month, I barely had enough to get by. But once I met my partner, I started to be better about saving. Why? Because he loved to travel and I couldn't travel with him if I didn’t have money at the end of the month to pay the rent.
I found the motivation I needed to start saving. If you have trouble putting money aside every month, then a savings club could help you reach your savings goals.
What is a savings club?
A savings club is when a group of people make contributions on a regular basis and are paid out at a set time. A common savings club is a Christmas club.
This is an account where members save throughout the year and then withdraw in time for the holidays. Savings clubs started in the early 20th century as a way to build up savings for the holidays.
These funds are generally held in short-term accounts at a bank or credit union. Depositors are usually expected to set up regular deposits before a specific date. You can often set it up to come directly from your paychecks, so you don’t even have to think about it.
Financial institutions may also set up other incentives to get members to save, such as a penalty for withdrawing funds early.
Savings clubs can also be set up outside of a bank, in an informal setting among friends or colleagues. For example, the Susu savings is a popular non-traditional way to save.
The Susu is essentially an informal group savings club. Each member contributes an equal amount of money to a savings pot over a set period of time. Then they each receive the lump sum of every contribution at least once.
The benefits of savings clubs
Savings clubs offer users the chance to not only save but also add a somewhat social element to saving. You can join a savings club with your friends and family.
We are more likely to accomplish our goals when someone or something holds us accountable. Studies have shown that when we share our goals and accomplishments with others, we are twice as likely to achieve them.
With a savings club, you may also have other incentives, like earning high interest. You can also set up an informal club, such as a joint account between couples. This gives you the accountability to save but gives you the freedom to withdraw and add as you are able to.
How do you start a savings club?
If you want to start a savings club you can follow these simple steps:
1. Create a plan
First, decide what your goal for the club is. Do you want to save up for Christmas or another holiday? How long do you want to save for? It’s important to know when your savings club will end, so you know when you will achieve your goal.
It’s also a good idea to know how much you want to save and break down your savings monthly or bi-weekly. Having a concrete goal and timeline in place before you begin makes you more likely to accomplish your goal.
2. Find others to join you
A savings club is all about being social, so find others to join you. If you’re joining a club through your credit union or bank you may not need to find others to join you but it will certainly help you stay motivated. On the other hand, if you are creating an informal group, you’ll need to find others to join your club.
Make sure that all the others in your savings group have the same goals and are ready to commit too. Remember, setting one up is all about keeping each other motivated and accountable to save for a specific amount of time.
3. Find a bank or credit union
You’ll also need to find a bank or credit union that either has savings clubs as an option or allows you to set up a joint account with others. You can also decide to set up separate accounts. Regardless, you want to be sure that your funds have either FDIC or NCUA insurance.
These are insurances that the bank or credit union provides that protects your money if the financial institution would fail. You should also check with your bank to make sure there are no regulations or other requirements.
4. Set up payments
Once you set up a bank or credit union account, you’ll need to start setting up payments. You can set up weekly, bi-weekly, or monthly payments. To make sure you meet your savings clubs goals we recommend setting up automatic, recurring payments.
Make sure that the others in your group also set up payments, so that you all receive the savings club funds when it is over. For example, if a group of six people agrees to save $1,200 a month, that’s $200 from each of you every month.
5. Check in with others
The fun doesn’t stop once you set up your account and recurring payments. Be sure to check in with the other members of your group. You can even set up weekly or monthly meetings, either in-person or online.
The point of savings clubs is to be social and keep each other motivated about it, so have fun with it!
What's the difference between savings clubs and savings accounts?
While savings clubs and savings accounts incentivize you to put your money aside for a rainy day, there are some key differences between the two.
For one, a savings club often offers higher interest rates than a typical savings account. It usually is also only set up for a specific amount of time, or for a specific goal. Savings accounts are designed to keep your funds safe until you need them to pay for an expense.
Savings accounts are also not at all social. The account is usually just an extension of your checking account. But with a savings club, there is a social aspect as you pool your money with others to save for a specific goal, such as a birthday party, or a car.
Should you have a savings club or savings account?
Whether you join a savings club or open a savings account depends on your personal financial goals. For example, say you want to save for a vacation to Japan in a year with your family.
You may all decide to join a savings club, so you have the money you need when it comes time to buy the tickets. But if you’re trying to build up your emergency fund, it might make more sense to open a savings account with a high-interest rate.
Use savings clubs to meet your money goals!
If you struggle to save or want to make sure you can save for a specific event, then a savings club could be for you. Find others who want to save for the same goal as you, like your friends and family, pool your resources together, and before you know it, you’ll be on your way to meeting your savings goal.