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Why the Sou-Sou Makes No Sense

I had never heard about a sou sou until a few weeks ago when a listener asked me my opinion. Since then, I have researched it so that I could talk about it on the radio and write about it in these pages.


A sou-sou is a group savings plan designed to be set up with family and or trusted friends. There are many variations of this group savings plan. At its basic core, here is how it works -


Let's say we have four people participating in the sou sou and each member is committing to saving $100 a month. In addition, every month starting with the second month, 1 of the four members will get a $400 lump sum. We have Joe, Bill, Sue, and Jane. In month 1, each of the four group members deposits $100 into the master account, totaling $400. In month two, Joe gets a lump sum of $400 while all 4 of them deposit $100 into the master account. Then month 3, Bill receives the $400 while everyone puts in $100. Then this happens every month until every person gets a lump sum of $400. Money goes into the master account, and money flows out of the master account.


Are there any real advantages to participating in a sou sou? I only see two benefits. First, you get an advance on your savings and could be considered a short-term loan. Second, it is an accountability group for saving. That is as far as I can stretch the benefits.


Here is what I don't like about it.


(1) A person's financial situations can drastically change, preventing them from contributing. In a lot of these groups, if you can't contribute, you forfeit your contributions.

(2) If a person uses this as an advance on their savings, they might not be the right candidate. see #1

(3) You don't need a group like this to be held accountable for saving money. If you are serious about saving money, then a close relationship will do.

(4) In most cases, the person organizing it or the "banker" gets paid. Thus it costs you money to save.

(5) These groups require a high level of trust - a level that is unrealistic for 100% of a group's participants.


That is just in general. How about the shady aspects of a sou sou?


(6) Some of these YouTubers promoting these groups suggest that the wealthy are not investing in the stock market anymore. They are using the sou sou method. Seriously?

(7) These are good candidates for Ponzi schemes. There are incidences where the banker invites you to join only if you bring two friends to the group.

(8) Some of these groups are using cryptocurrencies. A good portion of the scams committed today involves cryptocurrency. A sou sou would make for a great crypto scam. Plus, you never want to put your savings in crypto. The value of this currency can swing way up and way down in a single day.

(9) Given a big group, you could be talking about significant deposits. It would be easy for a banker to steal money.

(10) You could find yourself dealing in unregistered security and get in trouble with the state securities board.


Why does it make sense to save into a saving account where it costs you in time, money, and even relationships? I will let you decide.