Community Savings Groups: A Step-by-Step Guide

We all know saving money is important, but it can be extremely difficult to do it alone. Community Savings Groups help you save money with members of your community. This article explores why it’s hard to set money aside by yourself and how community savings groups are making that easier. You’ll also learn how to set one up and how you can use Pool to get started. 

Below is a list of topics that we’ll cover in this guide: 

• Why saving money helps you feel at ease
• What is a Community Savings Group?
• How Community Savings Groups work
• How Community Savings Groups help you save money
• How to set up your Community Savings Group
• 9 reasons Pool is great for Community Savings Groups

Saving money helps you feel at ease

Research from the Center for Social Development shows that being able to save even small amounts of money is associated with lower anxiety, and another study suggests that having savings reduces the need for predatory debt, and it helps to avoid both expensive fees and financial hardships. This is true even if you have a small nest egg to fall back on. We’ve all seen so many studies like this, and yet saving consistently remains a seemingly impossible task.

Even though saving positively impacts the way we feel, reports indicate that individuals struggle to save consistently. 

There are significant reasons why people fall behind with this simple financial practice. 

Here are some of them: 

• When income feels insufficient, any amount saved feels small and insignificant
• It’s difficult to maintain the minimum balance required by many savings accounts
• It’s hard to plan for the distant future when you’re living paycheck-to-paycheck
• Saving doesn’t feel like a pressing need

These factors shed light on the difficulty of saving. But they don't have to disqualify anyone from saving regularly. Instead, these factors suggest that traditional saving methods, e.g., using large financial institutions, aren’t always the best solutions for people. 

Community savings groups, however, offer a viable alternative.

Ready to start a community savings group? Click here to create a Pool for your Community Savings Group.

What is a Community Savings Group?

Community Savings Groups are peer-to-peer financial structures that boast global success and popularity. They're popular in rural communities where access to banks and/or lines of credit are limited. 

These groups enable people to save money together with their community, and cultivate economic and financial security. They’re a powerful example of people helping people, and many individuals use them irrespective of socioeconomic background.

How Community Savings Groups work

Community Savings Groups meet the following criteria:

• Each person contributes a fixed amount to a shared account, like a Pool. Then, at each collection period, the lump sum is dispersed to one member until everyone is paid out at least once
• Everyone’s contributions are collected regularly (weekly, bi-weekly, monthly, etc.)
• These groups operate for a specific length of time (6 months, 12 months, etc.) and have a clear start and end date.

How community savings groups help you save money

Saving money is hard for many reasons. But thanks to the peer-to-peer nature of community savings groups, they mitigate some of these challenges. Take a look.

1. You can save together with just one account. This gives people the freedom to save without having to maintain a minimum balance or contend with fees. With one shared account like a Pool, each individual person does not need to open a new account.
2. Positive peer pressure encourages regular saving. Saving groups are formed among people who know and trust each other. This social bond incentivizes people to save regularly. Saving in a group also helps individuals feel better about their new financial habits. For example, if you need to forgo eating out in order to save with the group, there’s a good chance other members have to make similar sacrifices.  
3. Saving for short periods seems doable. If you save on your own, you probably try to set aside a specific amount, but not for a definite length of time. Savings groups don’t operate this way. Instead, they have a clear start and end date. Psychologically, these shorter time frames feel doable, and people are more likely to stick to them this way. Furthermore, when people save for specific time periods, they are saving for “the future” even if it doesn’t feel that way.
4. Experience the rewards of saving. It’s hard to feel motivated about saving when the amount seems small and insignificant. In a savings group, it’s different. More often than not, groups are formed by individuals who share similar financial backgrounds. This similarity removes the embarrassment around saving amounts, while also providing members with a sense of pride and satisfaction. For example, in Rotating Savings and Credit Associations (ROSCAs), each member contributes the same amount each period. And each period, one member receives the entire lump sum until everyone is paid out at least once. At the end of the saving cycle, everyone’s savings, including any interest earned, get redistributed to the members. Community Savings Groups like ROSCAs demonstrate that small savings compounded over time pay off.  

How to set up your community savings group

People need to save money for a variety of reasons:

• To make a downpayment 
• To prepare for unexpected events
• To start a business
• To keep a small business afloat
• To offset medical bills
• To pay off debt quickly 
• To purchase equipment for a business
• To purchase a car
• To take out a loan without going through the banks

Now might be the perfect time for you to start a Community Savings Group to reach a similar goal. This step-by-step guide shows you how to set one up and how to use Pool to keep everyone’s savings safe, visible, and easy to manage.

1. Form your group. Trust is essential for any savings group. Invite people you know you can rely on, like family members, friends, flatmates, and coworkers. 
2. Assign leadership roles. Once your group is formed, elect your leaders. These people manage the collection and disbursement of funds while the group is operating. 
3. Decide the group’s cycle length and collection schedule. How long will your savings group run? Six months, 12 months, etc.? How often will your group collect funds? Weekly, bi-weekly, or monthly?
4. Decide how your group collects and disperses money. If your savings group operates like a ROSCA, everyone contributes a fixed amount each month. Then, each member gets paid out on a rotating schedule until everyone has been paid out at least once. Decide your rotation order now.
5. Start a Pool to collect period contributions. Now that your group is ready to go, start a Pool to collect and distribute everyone’s savings easily and transparently. Keep reading to see why Pool is the best solution for modern-day savings groups in the next section.

6 reasons Pool works well for Community Savings Groups

Savings groups succeed when members can collect and manage money together in a trustworthy, transparent way. Here’s why Pool is right for your savings group.

1. You govern your Pool. You set your own rules. If you want to run a 6-month savings group that collects bi-weekly payments, you can. If you want to collect monthly contributions across 12 months, you can do that, too.
2. Your Pool is private and safe. Pool isn’t the first app to support savings groups. But we work extremely hard to make sure we operate privately and safely. For example, the only way someone can join your Pool is by sending them an invitation link. Pool also uses best-in-class security and compliance practices to keep everyone’s money safe and personal data private. All payment and personal information are encrypted end-to-end using SSL 256-bit encryption. This ensures that members can save with greater peace of mind.
3. Every transaction is visible. Trust and transparency are at the heart of every Community Savings Group. With Pool, everyone can view transactions, like incoming and outgoing funds, right in the app.
4. A Pool is flexible. If your group operates like a traditional ROSCA, take advantage of Pool’s flexibility and disburse funds whenever your group decides. There are no minimum balances or deadlines to worry about. And when your savings group is finished, you can close your pool without penalties or fees. 
5. It’s easy to collect and disperse savings. As Pool admin, you can use reminders to collect everyone’s contributions on time. If your savings group operates like a ROSCA with rotating payouts, there are two easy ways to manage them. First, set permissions and allow members to spend their payout amount when it’s their turn. Second, create a new Pool for each member when it’s their turn, and transfer their payout to their Pool. This way, their spending remains private.
6. Your pool is a dedicated place to collect everyone’s savings. In a traditional savings group, one person collects and manages money for the other members. This usually entails mixing group savings with a personal bank account. This can become messy and tedious quickly. With Pool, you can avoid that. 

As Pool admin, there are many ways you can manage your Pool:

• Invite or remove people from your savings group
• Set permissions for who can invite others
• Set spending permissions

Your Pool is a dedicated account where it’s easy to keep track of everyone’s contribution. Community Savings Groups are popular and successful all over the world. And now, you can enjoy them, too.  

Start a free Pool with people you know and trust and start reaping the many benefits of Community Savings Groups. They’re a powerful tool to increase savings, gain access to greater capital, and thrive together.