Sou Sou Savings Plan | Risky Business

Sou-Sou-Savings-Plan
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Very few people in the United States are familiar with something called a Sou Sou savings plan. It has several names, some are “SUSU”, “sou-sou”, “merry-go-round”, and “tandas” in Spanish.

These savings plans are not native to the US, they come from foreign countries and as more immigrants have migrated to the US it has become more commonly used in the US.

These accounts have grown in popularity across the years and continue to expand. As they become more popular it’s very important to take into consideration what risks come with a Sou Sou savings plan as well as alternatives to avoid taking the risks that Sou Sous bring.

What is a Sou Sou Savings Plan

To get right to the point, a Sou Sou savings plan is an informal rotating savings club where groups of people contribute money to one common fund and take turns on receiving the total amount within the fund on a predetermined basis.

Members must contribute to the fund, usually on a monthly basis. Every certain period, the total contributions are dispersed to a single member of the group. The recipient of the funds changes each time-period in a rotating fashion so that all members of the group are eventually recipients.

Any member who is not the last one to receive the funds must continue to contribute to the common fund even after receiving the money until the rotation reaches the last person.

There is no interest involved, nobody gains or loses more than they put in (ideally).

Sou Sous are not backed up by any type of insurance and are not specifically regulated by any governmental influences. The plans are organized by communities of people who usually know each other on a personal level.

Sou Sou savings rely heavily on the trust of the members within the club. Trust of the organizer to disperse the money correctly and ethically, as well as trust that each member contributes to the fund correctly and on time.

Risks of a Sou Sou Savings Plan

As said above, Sou Sous are based on pure trust. That’s the major flaw in this savings plan. Ideally, you want to know all the members of the Sou Sou, especially the organizer.

You need to make sure that every member pays their dues and that the organizer disburses the money ethically and correctly for everyone.

You cannot be 100% sure that all the members will pay on time, more than likely, the reason they’re part of this savings club is that they lacked the self-discipline to save on their own terms. So trusting their word on being able to pay their dues for this savings group is a risk on your part.

Since there is no governmental regulation or insurance like FDIC with a bank that will ensure that you get your money in case of collapse, if someone or something within the club defaults, there is no assurance that you will get your money when it’s your turn.

This risk is especially significant for the people who are receiving the money at the end of the disbursement cycle.

If for some reason the organizer does not disburse the money or commits some type of fraud, there is no law that protects you against that. You will lose that money indefinitely.

And if for some reason others stop paying their share of the money and you still haven’t gotten your money, there will be no way for you to have your entire share of the fund if you haven’t already received your disbursement.

Sometimes the organizer must take care of the problem is someone does not make their contributions. This is not always the case, though.

Also, this isn’t a risk… but when you save using a Sou Sou instead of something like a high-yield savings account, you not only miss the FDIC insurance, you also miss out on interest that could’ve been gained on your principal.

As you add more to a high-yield savings account and as your account earns more interest, it will earn more interest in the long run and it can add up to quite some extra money in your account without you having to do anything other than contributing to your savings account.

This is a major benefit that you miss out on by contributing to a Sou Sou instead of a high-yield savings account.

Benefits of a Sou Sou Savings Plan

Now, even though Sou Sous do not pay interest on your principal, and even though they don’t have any type of insurance to make sure you get your money in the case of collapse they do have some benefits.

These benefits are more psychological ones than anything else.

The benefits that a Sou Sou brings are the major push to make people who are not used to saving, save.

For example, some participants state that being part of a Sou Sou was more financially-effective because they feel an obligation to the other members of the group so they force themselves to pay into the fund on a regular basis.

Some of the participants go as far as to borrow money to make their contribution if they can’t make one at the moment. That way they continue to contribute to the fund without failing on the timing.

Even though it’s not a great idea and it is probably counterproductive to borrow in order to be able to contribute, it demonstrates the extremes that people will take to ensure that they are making their contributions on time because they feel that moral obligation to contribute.

This, in turn, forces them to “save” their money.

So, effectively, the benefit that Sou Sous bring to people is the moral obligation to pay-up, thus, forcing them to “save” money. Something very challenging for the typical American to do.

Conclusion

In essence, the whole point of a Sou Sou savings plan is saving money. If you aren’t the last recipient, your goal is to receive the money before you have to save it in its entirety.

So is the Sou Sou savings plan a good idea?

My personal answer to this question is a resounding ‘no’. But, as I say in several of my other articles, there is no one-size-fits-all when it comes to finance.

Here’s why…

I think if a group of people who all know each other very well and who are terribly bad at saving money even after trying several times in the past come together to start their own Sou Sou, it could be a benefit to them.

They will have more of an impulse to save their money. Since they have never been able to save in the first place, this extra push to save money might be what they need

That being said, this group of people still runs a risk of losing money in the case of default and there is no governmental authority to ensure that all members get back what they put in. There is also the benefit of high-yield that you completely miss out on.

These are both very important flaws in this savings plan but to those who have no other way of saving, it can certainly work for you.

Now…

While I can acknowledge the fact that several people have always struggled with saving money, I strongly believe that this is a behavior that can be changed. I think that saving money can become an emotional priority if you really put your mind to it without the need of feeling a moral obligation to someone else.

In fact, you don’t even have to think about savings in today’s world… you can now have automatic deposits going toward a savings account on a predetermined basis without you needing to do anything other than setting up the automatic savings plan.

You can do with a savings account that not only backs up your money with FDIC insurance but also pays interest to you on your principal, thus, having you gain more money on your savings than you would in a Sou Sou savings plan.

So should you get into a Sou Sou savings plan? I would recommend looking at alternatives like a high-yield savings account… and if you struggle to save money, set up an automatic savings plan.

Just know that if you still choose to take the Sou Sou route, (I’ll say it again) you’re missing on the safety and leverage of your principal.

The choice is yours in the end.

If you have any questions please feel more than welcomed to leave them in the section below!

 


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34 Comments

  1. Wow I have never heard of the Sou Sou savings account.  I think it does sound like a unique and interesting concept.  The tough part does seem like it is a honor system type which means trusting everyone to actually pay the amount required.  Does everyone pay the same amount?

    Saving money is a super tough thing, so I get thinking outside the box, but I don’t think this is something that I would be a part of.  Great read and thanks for sharing.

    1. Yes, everyone pays an equal amount to the account! Everyone will end up making the same contribution in the long-run.
      Regardless, I agree. I don’t think it’s the best plan but I’m sure there are those who would argue that it’s the best thing for them individually. If they truly believe that, then I have no place to object but I still think something like an automatic savings plan with a high APY would be a much better option for anyone!

  2. This is the first time that I have heard of Sou Sou saving plan before. I am only familiar with CD, IRA, roth IRA or 401K. This SUSU is very similar to what my father is involved in. He has a group of friends and they do exactly the same thing as you described. Most of them are business owners and sometimes they need cash to keep their business flowing o this SUSU helps them out. Thanks for bringing this to my attention, now I know the english term for it. 

    1. Of course, I’m glad is involved in that with people he knows only. It’s good to see this being used for good things. Thank you for your feedback 🙂

  3. Hi, Your article is really interesting and useful. I have never heard of the Sou Sou savings account. I think it sounds like a unique and interesting concept. Honestly I don’t think it’s the best plan and based on the alternatives you offered, I think there are better options out there with less risk. Thanks for bringing this to my attention!

    1. Yep! There are certainly better alternatives out there. I’m glad I could provide some info 🙂

  4. Hello there!

    The article there is well appreaciated. I have heard briefly about the Suo Suo saving plan but didnt really understand what they were about and what their services actually was. This article has just revealed a whole lot about them and this article will help a lot of people from losing their money if the scheme turns out to be truly illegal. Will do well to make further research about them.

    Thanks.

  5. Hello, “There’s no legitimate product,” Lubin points out. “There is no business or anything else. What’s really important for people to understand is that it doesn’t matter what you call it and it doesn’t matter what shape it takes. for me, I would advise you to give it a try.

  6. This sounds like a very interesting concept. After reviewing your article on Sou Sou savings plan, I would have to agree with you that this sounds very risky to the member (if that is what you want to call them). I do not see much advantage but I do see a ton of risk and fraud. I appreciate your review as it was informative and made me think.

    1. Surprisingly, there are not too many stories about fraud! I personally know plenty of people who have not had any negative experiences with Sou Sous. Nonetheless, there is a lot of room for fraud and there really isn’t much of an advantage to them, other than forcing you to be responsible to pay in. Thank you for your feedback!

  7. Hello Misael,

    I’ve never heard of Sou-Sou’s before, and I’m actually amazed that the only real benefit is the additional motivation to save.

    That being said, I used the same thing to stay in shape when I was younger.  I found that participating in group sports really helped me stay on schedule, rather than just doing solo runs to the gym.

    Thanks for writing this article, and letting us all know about these types of accounts.

    Michael

    1. Thank you for surfing around the site 🙂 yes! Being part of a group to help you stay on schedule and stay responsible can be a HUGE help. Just like your example, health and fitness is a great example. Sou Sou savings plans can certainly help people in the same manner for their financial success. Unfortunately, that’s its only benefit aside from getting the money before you’ve saved all of it if you aren’t the last one in line. Thank you for your feedback 🙂

  8. ♪♪♪ SOU, SOU, SOU, SOU…♫♫♫ That was a jingle used on a car ad. But we can’t compare the car with this.

    This “Savings Plan” isn’t a Savings Plan never, ever. These are some facts that I saw on this “account” that really don’t have:

    1 – Isn’t a savings account

    2 – Isn;t a bank-recognized account

    3 – The member doesn’t earn any yield (APY) for money amount deposited

    4 – Not FDIC insured

    5 – Not owner name on it. You never will know who opened, or created it

    And the most hazard problem this will create: A PYRAMID SCHEME!

    Even FDIC banks and CUNA Credit Unions have APY and Insured Savings Accounts upto $250K, they are worthless becaise their APY is less than 1% in all of them. For example, a friend of mine has $200,000 on his Savings Account, and the bank only pays $29.50. (UNBELIEVABLE, BUT IS THE REALITY SHOW)

    When I opened my first Savings Account, its yield (APY) was 5,5%. (If someone finds a bank with this APY, just let me know)) 

    1. Thank you so much for your feedback! Yes! I completely agree, the benefits to a Sou Sou are extremely minimal! On that last point though, sometimes members are aware of who created the Sou Sou, of course, that doesn’t legally make it safer, but that’s why some people are more comfortable with it. Regardless I agree with you. Even banks with low APY are a better option… And with the current fed interest rate it’s going to be hard to find a savings account with an APY that high haha. The best account I’ve run into has been T-Mobile’s Bank Mobile. They offer 4% APY on the first $3k and 1% on everything beyond, despite the current low-interest rates. The only cache is that you have to be a customer with them to have access to this APY. Again, I appreciate your feedback 🙂

  9. wow….this is new but……. kinda risky….but the good part is that people who don’t know how to save will need a plan like this which is fun and exciting…. I like the explanation you’ve laid out for those of us who are not familiar with these plans. I am curious to know how many people would actually take these risky plans for their savings.

    1. Thank you 🙂 and that’s a great question. I haven’t looked into that one!

  10. Hi Misael,

    What a great service you have created for the WWW with this entire website. I have been looking on finding trusted resources to read about like the ones you touch on, including finance, savings, and Cryptocurrency. Many other sites I went to I felt apprehensive. On your pages, I felt relaxed and at home. I could not believe it. I felt I buy into any of your products and ideas. The level of clarity in your content, Is the reason for my Trust. I was drawn to your Instagram page. reading through some of the titles i wanted to take some of the lessons.

    I will definitely return to this site to get my information and get help in deciding on how i can invest and grow my money. I agree that money comes inevitably,  that one should invest in Education. I would really like to continue engaging with you.

    Do you give coaching? 

    Ntlhane Ratlhagane

    1. I’m very happy to hear that this website has been helpful to you! I appreciate your words! Thank you for this appreciative feedback 🙂

  11. Thank you so much for sharing a good article to know more about Sou Sou Saving Plan, as I was born in Mexico I heard often the word Tandas when I was a child, but my parents always told me not to get into it as they told me that was not a good plan to work on savings. I see as you well mention on your article this saving plan is a way for some people to make a saving plan today in the States, well I think it’s hard to make some people to change their saving habits when they grow up thinking this is a way to do it, but I’m glad you took your time to write a good article to explain more about what it is and why not to do it, if someone is looking for a way to make some money I will recommend to follow your recommendation and use a high-yield savings account, they will be surprise they can make money on their savings just from that!

    1. Yes! I come from Mexican heritage myself and I often see so many relatives getting into them. It baffles me how much they rely on ‘tandas’ to ‘save money’ when there are better, safer, and more lucrative options out there. I made this article also thinking as if one of my partners was going to read it! Thank you so much for your feedback! I’m glad you relate to this from your heritage as well

  12. This Sou Sou savings plan is a very interesting concept. I tend to see that the concept is noble, to help people to save. But indeed, there is no protection, the only protection is trust. It is better to save in a high yield savings account to be protected. However, I think the interest rates in a savings account will never be too high anyway. But you know what, probably this idea works well to train children on the idea of saving? The usual way I know of to teach children financial literacy nowadays is just to open a children’s bank account or the old school piggy bank. But if they can do this with their cousins, it seems to me that it can teach them some valuable lessons. 

    1. Wow! What an interesting observation. I definitely think there any small group of children to teach them how to properly manage their money this could definitely be a good idea! But it is important to inform them that the real world will not provide the same amount of trust as your family members. But this is a good way to encourage children to save, something that is vitally essential in daily financial behavior

  13. I had definitely not heard of Sou Sou savings plan. Sounds interesting, but that element of “trust” at the center of its design seems to be a major flaw. Personally, I like to feel more in charge of my own savings plan, and the Sou Sou method feels like it brings too many cooks into the kitchen. It’s interesting to be aware of this (knowledge is power), but it’s definitely not the right savings strategy for me.

    1. I agree. It is definitely not for me either. I know a lot of people who have used them, so far I haven’t heard negative Experiences. But this is only because they do it with very small groups of people and very trust worthy people. Nonetheless, I’m not a fan of the plan either

  14. Hello Misael! well This is well explained! Lovely article! Sou-sou is an unorthodox way of saving money! All you need is a group of persons with same interest and support for each other! It is way better than a bank loan! You would even get to save money in the process! It is a really good idea for someone who needs capital to start up a business 

    1. Certainly could be! In certain ways, it definitely could be better than getting a loan 

  15. I had definitely not heard of Sou Sou savings plan. Sounds interesting, but that element of “trust” at the center of its design seems to be a major flaw. Personally, I like to feel more in charge of my own savings plan, and the Sou Sou method feels like it brings too many cooks into the kitchen. It’s interesting to be aware of this (knowledge is power), but it’s definitely not the right savings strategy for me.

    1. It’s not the right saving strategy for most people. Thank you for your feedback

  16. Hello Misael, I appreciate your straightforward writing on financial subjects. I’m a trained scientist, but financial jargon can still set my mind spinning. 

    I actually grew up in Mexico City, where most of my family derives an income from informal commerce. Because of this, few of them have bank accounts. So I heard about tandas regularly while growing up.

    I agree with what you write, there is no one-size-fits-all in things financial. Most of my family members struggle to save money, so the tanda was a viable financial tool for them. It put social pressure on them to save. I never understood why they did it until I became an adult and I learned a little more about how money can bring out the fool in all of us. 

    1. It’s so good to have someone on here who has experience with family members that use them! Yes, they can definitely push people into saving money! That’s a pro that can definitely be an outweigh-er in the decision to use them. It’s specifically why they are still used in small groups of people. 

      Thank you for your feedback and for sharing your experience with them!

  17. I hadn’t heard of it, and at first it made since but it doesn’t look like you’d make any money. say 12 people put in $10 every month and each month one of them gets the total. So each month, there’s $120 in the pot and one person receives the cash, so when it’s your month you get $120 but it cost you that in the year of entering your share. So there’s no interest, no gain, it’s just shuffling money around. If you can trust all 12 people to pay and the “bank” actually hands out the funds as agreed to each person. I can see scam artist taking advantage of this and never paying out. Nothing about it sounds safe.

    1. Yep, that’s how it works! And it opens windows for scams for sure. There is no interest gain. The biggest benefit of it is that it pushes people on the moral responsibility to save money

  18. Sou Sou savings plan sounds like a scam scheme. My reasoning for this is a group of people putting money in a common interest and one member receives the funds by order or rotation. It is a sure-fire way to lose hard earned money in the long run. Also, the fact that it relies solely on the trust of members involved. I would not be interested in this particular savings plan.

    1. Yes, it can be very dangerous for sure! 

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