Dear Auntie Chambu:Kimbi
After three years of living in a cramped apartment, my husband and I started saving up to buy our dream house. I've belonged to a susu for the past ten years but I'm not sure that's enough of a savings plan. Any advice on a strategy that makes my dreams come true?
You know, I think the world of the susu as a vehicle for saving small to mid-size funds. I have known a lot of people do great things like put a down payment on a house, pay college tuitions, start up businesses or even travel overseas with monies earned from a susu group. For those of you who do not know what a susu or a njange is- here's a primer: usually a susu or njange is comprised of family members, friends or even co-workers who band together to form a financial savings group.
There are about three variations of susu or njange. The first is when a given sum is equally contributed by the members of the group. This money is then loaned to group members at a very low interest rate. It is a short term loan, usually 1 - 2 months, and the interest is deducted before the money is given to the borrower. The second susu method is pure savings by group members and the bank is "broken"or dissolved at the end of the year. In this case each person determines how much they want to save each time. The third and most common susu or njange format is when each group member contributes an equal amount of money ranging from 50 to 1000 dollars per month. Numbers are drawn and the sequence of "picking" the money is thus established. The money is handed over to the first name on the list and down the list each month. In some cases a combination of the three formats is used. Some of the money is loaned or a savings account is set up to be dissolved at the end of the year. Usually the main mandatory contribution is made by everyone and the savings is voluntary.
The main advantage of a susu is that it forces savings. Members know that they must contribute monthly or bi-monthly once they have committed themselves. It is an honor system in which people join knowing that the group trusts them and counts on them to contribute to others once they have had their turn and "chopped" money. Their word is their bond. There is no service fee levied at a susu or njange.
The susu is great for people who do not have access to banks, savings associations or credit unions such as in most African villages (where this system evolved). It also fosters social ties between its members as drinks and food are usually served during meetings before the business of the day is entered into.
The problem here is that people are counted on to be honest in continuing to pay in until every group member has received their due. My own experience is that things do not always work out as planned. In the past , I have been caught up in a susu or two where some people collected the money and ran. Fortunately in both instances social pressure was brought to bear and the money was paid up. But in a less cohesive society such as we all live in the western society, you have to be careful. Make sure that some legal document is drawn up and signed by the susu group members in case anyone defaults.
The main drawback of a susu is that the savings are not interest bearing. You should supplement your susu with the Western banking system- a money market account could help you grow your money more. You stand a good chance to gain interest by buying short-term (6-12 months) CDs, for example. Some special saving accounts pay a high interest rate provided you open them with a basic amount and maintain a minimum balance. I suggest that you shop around for the best deals. Another advantage in going with a bank or a credit union is that your money is insured and the risk for you and your money is low.
Whatever your savings method- be disciplined and consistent. Owning property is still one of the best ways of living the American dream. I applaud you for planning to buy your own place. Good luck to you and your husband.
Auntie Chambu, 52, was born and raised in the grasslands of Cameroon. This sheltered nineteen year old, boarding school girl came to a rebellious 60's United States to pursue a college degree and her dreams. She garnered degrees in social work and counseling, got married, and had four kids who constantly put her education and home spun wisdom to the test. After over twenty years of living on the two continents, her advice has a great mixture of traditional African insights with a spirited American independent thinker streak.
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