Should you join a sou-sou money leading group?

For the uninitiated, a sou-sou is a money leading group in which participants contribute a set amount each time period and one person receives the full pot each time. Let’s say there are six people in the sou-sou and everyone puts in $100 each month. In January, Mary puts in her $100 with everyone else and gets the $600 pot. In February, Deborah puts in her share and also get the full pot. This continues until everyone has had a turn receiving the full pot.  

Sou-sous have been a traditional way of communities supporting their own and maintain bonds in a new country. According to an article from Essence magazine sou-sous are common among Caribbean and African immigrant communities, although other groups are also known to practice it. The first time I heard of a sou-sou is when I started my first job out of college. A couple of coworkers had one going and asked me if I wanted to join. I barely knew these people so I politely declined. Still – this may be the anthropology major in me talk – I thought it was interesting that they created this support system at work.  

While sou-sous have traditionally helped people raise large sums of cash and are a form of social support, they have a number of drawbacks. Here are some of the pros and cons.  

Pros 

• You can get a large amount of cash without have to save for a long time 

If you need cash immediately you can be one of the first rounds. In an emergency this can be a lifesaver if you haven’t had the chance to build your emergency fund yet or if it’s not enough to meet your needs.  

• Sou-sous provide an excuse for friends to connect 

In the aforementioned Essence article, one participant noted that the sou-sou was an excuse to meet up and maintain connects with friends from home countries. If you’re in a neighborhood with few friends or kinfolk, sou-sous can be a great way to maintain connections. 

Cons. So many cons. 

• All participants must be trustworthy  

Sou-sous operate on the honor system: every member is expected to contribute their share each month. However, most sou-sous are informal and I doubt if many have any written agreement that folks sign and notarize. Therefore, there’s no stopping Mary from taking the first pot and “disappearing” for the next five months or “forgetting” to put in her share.  

• May not be kosher at your place of business 

Creating a sou-sou at your job like my co-workers did may be a nice way to bond and help each other out, but it may be a grey area at your workplace. I later found out that my job frowns on money lending groups. You can probably see why: HR has better things to do then work out who owes who money. Work sou-sous can get especially dicey when a supervisor and subordinates are involved. Just say no.  

• You don’t earn any interest 

For me, this is the biggest con of sou-sous. The main reason why I didn’t join the work sou-sou (beside the fact I didn’t know them from Adam) was that I figured that I could put the same amount I would contribute to the sou-sou, invest it or put in a savings account and have the total sum plus interest. Without worrying about Mary dipping out.  

While the sou-sou might be a forced savings plan since everyone else is depending on you to contribute what you promised, you can have that same accountability by setting up an automatic deduction into a savings or investment account. In this way you get to control your own pot and benefit from it compounding interest over time. If you need the money within the next year or two, I suggest keeping in a high yield savings or money market account. You can use a site like bankrate.com to search for these types of accounts.  

What about you? Have you participated in a sou-sou or similar money lending group? Let us know your experience in the comments below.