Saving has always been hard. It has been hard since the advent of fiat currency, and even before that in a barter-driven system. There is something about sacrificing in the present for the potential of a better future that requires a tremendous amount of discipline and faith, making it a challenge for most people.

All of that is assuming you still have a significant income to save from and an inclusive financial system to facilitate wealth accumulation. Now imagine having little to no money and limited access to capital.

Saving in these circumstances becomes exponentially harder: You’re not giving up luxury items anymore, but basic items that could significantly improve the quality of your life on a day-to-day basis. Actually, this is the reality for the majority of world.

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More than 2 billion people, primarily across Africa, Asia, and South America, remain unbanked or underbanked. Of the world’s total population, approximately 70 percent qualify as poor or low income, according to the Pew Research Center.

It is this reality that has given rise to the world’s oldest financial intervention and savings technique: rotational savings. Rotational savings is a practice in which trusted friends and family form groups, pool money together, and take turns withdrawing from the collective pot to make big-ticket purchases and investments.

These purchases include education, home goods, and those for launching a business, among others.

For communities with limited assets, leveraging a social capital-driven approach makes a lot of sense.

What is more surprising is how widespread this practice is . Known as cundina in Mexico, chit fund in India, esusu in Nigeria, hui in China, kye in Korea, paluwagon in the Philippines, stokvel in South Africa, tanda in Latin America, and on.

Beyond its almost universal adoption, this practice has stood the test of time; there are records of rotational savings dating as far back as 13th-century Japan.

All of this raises the question: Why? That is, why has this system become so widely adopted and entrenched around the world, and why does it work so well? Here are the four components that make the rotational savings wheel go round.


It often takes one event to send a person into an unalterable downward spiral of financial struggle. Rotational savings leverages a strong community element in which people are able to rely on their trusted network when they are at their most vulnerable.

When faced with an unexpected medical bill, job loss, or exorbitant educational expense, a participant can leverage the group fund as an emergency fund, obviating the need for predatory fringe financial solutions such as payday lenders.

Alternatively, rotational savings can be used to effectively plan for an expected expense or purchase that may be out of reach otherwise.

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Peer Pressure (Accountability)

People are often bad at saving because they struggle to hold themselves accountable to internal goals. But most people are incredibly responsive to external expectations — in other words, peer pressure.

The bestselling author Gretchen Rubin describes this as the trait of an Obliger in her Four Tendencies framework.  If you’ve formed a savings group with your family and best friends, there’s no way you can default or not pay without significant social and personal consequences.

This more than anything serves as the major deterrent to taking money and jumping ship. It leans on the theory of economists Dean Karlan and Richard Thaler, which has been popularized by Tim Ferriss on StickK, a commitment-making website.

Effective Goal Setting

How many of you have heard friends express their New Year’s resolutions in incredibly broad, sweeping terms, such as lose weight, save more, and eat healthier? One of the biggest problems with this is that the goal is not specific or even approachable.

Corporations across America now promote the concept of SMART (specific, measurable, attainable, relevant, and time-bound) goals,  having recognized that broad statements are effective in speeches but impossible to implement.

Rotational savings intuitively fosters the SMART approach by forcing the creation of specific goals and parameters, which are based on your current financial situation.

Before starting a savings group, you must have a specific, time-bound goal that is achievable and whose achievement can be easily measured. Setting the right goals is half the battle, and doing so will set you up for success.

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Habit Formation

It is commonly accepted that habit formation takes 21 days. Whether or not that is exact, most savings groups last at least six to 12 months, which is definitely a long enough time to develop new habits.

When savings becomes automatic — like a reflex — it is much easier to maintain.

In fact, rotational savings groups are so habit-forming that most last more than five years. As the group begins accumulating wealth, each cycle  offers more leverage and opportunity, which can be true pathway toward socioeconomic mobility.

Despite the adoption of rotational savings across most of the world, the practice has never taken root in the United States. Perhaps this is due to the higher median income, cultural norms, or the financial and political infrastructure of the country.

But in an America where more than 70 million adults have less than $400 in their bank accounts, and where more than  57 percent of adults are considered financially unhealthy, there is a compelling case to be made for the greater adoption of such a system.