The Complete Guide To Family Savings Clubs
Family savings clubs are designed to help you save money. Whether it’s saving for Christmas, an emergency fund, or for travelling home to see family and friends, joining a savings club can help you become a more disciplined saver.
So which type of savings club will work best for you? In this article, we’ll look at:
- What types of family savings clubs you can join
- The benefits and risks of joining a family savings club
- How you can make use of a savings club and protect your money.
Rotating savings clubs
A rotating savings and credit association — also known as a ROSCA — is an informal savings club usually run between family, friends, and colleagues. One person takes on the role of ROSCA organiser, and is responsible for collecting contributions and arranging payouts. As a group, you decide how much you’ll pay in and how often. Each person receives a lump sum equal to the amount they pay in over time.
ROSCAs are very popular with growing communities in the UK. Pardna, committees (kameti), ajo, and esusu are just some of the names for ROSCAs around the world. Learn more about setting up a ROSCA in the UK.
Accumulating savings clubs
An ASCA — or accumulating savings and credit association — is similar to a ROSCA, but it can help group members make a profit. Instead of sharing the pot directly between contributors, it’s used as a fund for loans.
Group members and other trusted people or entities can request loans from the group. Loans are usually paid back with interest, ultimately increasing the value of the fund. The fund is then shared between members, so they get back more than they put in.
ASCAs deal with interest, so they may not be suitable for Muslims, as interest, or riba, is often considered haram.
Christmas savings clubs
Christmas savings clubs are a more formal family savings club than ROSCAs and ASCAs. They’re run by commercial companies. Over the year, you pay into the savings club. In return, the company will issue you with gift cards and vouchers you can spend at Christmas. This helps you spread the cost of Christmas out over the year, so you can avoid ending up with no money for Christmas.
You won’t get any interest on your Christmas club savings; the amount you receive is worth exactly what you’ve paid in. The scheme is designed to help you save regularly without dipping into your fund throughout the year. But it’s not the most cost-effective way to save.
Benefits and risks of family savings clubs
Joining or setting up a ROSCA is a fantastic way to save money if you don’t have access to a traditional bank or credit union savings account, or you prefer a more community-focused system for saving. It helps build up everyone in your group so they can save for what matters to them. You can invite anyone you like to participate, helping your community thrive.
Christmas savings clubs can be helpful if you often find yourself without enough money at Christmas. But these clubs tend to be quite restrictive. While you’ll spread the cost of Christmas out over several months, you’ll be limited in where you can spend the vouchers. Plus, they’re only useful for saving for a specific time of year, and no other members of your community will benefit.
Savings clubs aren’t covered by the Financial Services Compensation Scheme in the same way that bank accounts and credit unions are. If the savings club operator goes bust, you won’t necessarily get back any of the money you’ve paid in through this scheme. However, new laws mean commercial savings club operators must now have insurance to protect your money.
Informal savings schemes like ROSCAs and ASCAs aren’t protected either — but by using technology and ensuring you save with people you trust, you can still keep your money safe.
How to protect your money in a family savings club
Save with people you trust
Invite people you know and trust to join your ROSCA. With Bloom, you can invite up to 10 people to join your savings club circle. That means you can keep your group to your most trusted contributors. Find out more about who Bloom is for.
Use tech to manage your savings club
Using regulated apps to manage your savings club makes sure your money is stored securely. Bloom’s ROSCA app protects your savings using vigilant anti-fraud and anti-theft technology. See 10 reasons to use a ROSCA app to learn more.
Read the small print
If you’re considering paying into a savings club, you need to make sure you can trust the company or group with your cash. If you’re thinking of joining a Christmas savings club, read the small print on their website to make sure you know what happens if they go out of business.
Start your own rotating savings club
ROSCAS are all about trust and tradition — which is why they’re so popular with growing UK communities. If you’re not part of one yet, it’s easy to start your own. See our step-by-step guide to starting your own ROSCA to learn how.