In today's fast-paced life when people are just too busy to socialize with others, initiatives like a social savings club not only help in interacting with others but also help in saving a considerable amount of money. These clubs are formed by people to collectively save money and utilize it for a personal cause. Many people save money through such clubs for an entire year to spend during Christmas. Some even save money to reap its benefits in their post retirement days, or for the education and marriages of their children, where a lot of expenses will be incurred.
Like other clubs, a social savings club also gives its members a reason to get together once a week or a month at a café or a restaurant for socializing. The money collected during these meetings is kept in a high-yielding bank account, so that it provides impressive returns after a certain period of time.
Starting a social savings club is easy provided you adhere to the formalities of the bank and IRS. There have been cases where people have been duped by fraudulent members. Hence, it is essential that you start the club by involving people who are already known to you. Here is the process of starting your own social savings club.
Fix the number of members for the club. For example, if you choose a 10-member team, it will be easier to manage. However, if you start with a 50-member team, it may get difficult for you to handle so many members. Search for people who have common and realistic goals for saving, like those who are planning to save for their retirement. This will also help them to bond easily. As mentioned earlier, select people whose background is known to you. As a lot of money is involved, it is always better to give entry to trusted members only.
Deciding the Amount
After choosing the members, you must review the financial goals of each member. Determine how much each member can contribute and prepare a schedule for payouts. While deciding the amount, ascertain the financial capability of each person. Make sure the objective of saving a certain amount at the end of the year is clear to the members. For example, if you want to save $1200 by Christmas, you will have to chip in $100 every month. It is easier if all the members contribute a specified monthly amount to the club, as varying amounts can be confusing. Maintain a record of all the contributions made. You can take the help of audio-visual aids to describe where the group aims to be in the next few years. This will motivate the members to save their personal income.
Once you decide the members, you will have to draft a membership agreement and take the signature of all members. It is better to get the membership agreement prepared by an attorney. The agreement should give all the details of the members, their name, address, contribution, etc. It should also clearly state the terms and conditions, and the payout date. The agreement should also speak about clauses, like how to send the money if a member is not present for the meeting, an exit strategy if a person leaves the social savings club, etc. It should also state when a member will receive a refund and what will be the amount. This decision can also be subjected to a vote by members. It is better to get the document notarized as it will be an acknowledgment that the members will contribute towards savings. It can also be treated as a promissory note.
Forming a Committee
Select members from your group to form a committee. As many people are involved, there are chances of conflict. So, it is better to have a voting system in place, especially for determining the post of the president, treasurer, secretary, etc. who look after the proceedings of the social club. These people can also take help from other members if required. For example, a member who is working in a bank can definitely help out the treasurer with the formalities of opening a bank account and depositing the amount. However, ensure that the selected committee is honest and trustworthy.
You will have to arrange for meetings and decide the venue for the same. It can either be same throughout the year or can change according to the convenience of the members. It is better to host the get-together at someone's place, as meeting at a café or restaurant will incur additional cost for the members. You may ask the members to host the meeting turn-by-turn, so that the burden of the expenses do not fall on a single person. You can also host get-togethers at various restaurants if you are ready to spend for it.
Depositing the Money in Bank
You need to deposit the money in a FDIC-insured bank by opening a high-yield account. It can be either a personal account or a business account. You can set up one account or multiple ones depending on the money you are aiming to save. The committee members should have access to it for depositing money and monitoring the transactions. You will also have to be aware about the tax applicable on the interest of the savings, which you will have to pay. It is best to take the help of a tax consultant to calculate the exact amount.
Your group can also act as a microlender by offering personal loans with attractive interest rates. However, verify the background of people you lend money to and maintain the appropriate records. Also, avoid investing your group's hard-earned money in stocks, as it can be a huge gamble. Consult an investment expert to understand how you can redeem maximum benefits from your social savings club.