Can I trust a SACCO with my children’s school fees?

Saving for children’s education is one of the most important financial priorities for many parents. In Kenya, Savings and Credit Cooperative Organizations (SACCOs) have become a popular option for managing and growing money for school fees. But is it safe to entrust your children’s education funds to a SACCO? Here’s what parents need to know.

A SACCO is a member-owned financial cooperative that provides savings and credit services to its members. Unlike commercial banks, SACCOs operate on a cooperative model, meaning profits are usually shared among members. They offer products such as savings accounts, school fees savings plans, loans, and investment opportunities.

Benefits of Using a SACCO for School Fees

1. Dedicated Education Savings Plans: Many SACCOs offer school fees plans that allow parents to save a fixed amount regularly. These plans often have flexible terms and may provide higher interest rates compared to traditional bank accounts.
2. Convenient Payment Options: Some SACCOs allow direct payments to schools, reducing the risk of mismanagement or delays when paying fees.
3. Access to Loans: SACCO members may qualify for short-term loans to cover sudden school fee demands, which can be helpful in emergencies.
4. Member Dividends: Profits earned by the SACCO are often distributed as dividends to members, potentially increasing your savings over time.

Risks to Consider

While SACCOs offer benefits, there are risks that parents should be aware of:

• Mismanagement: Some SACCOs may have weak management practices, increasing the risk of fund mismanagement. Always check the SACCO’s history and reputation.
• Uninsured Deposits: Unlike bank deposits protected by the Kenya Deposit Insurance Corporation (KDIC), SACCO savings may not always be insured. In case of financial distress, recovery may be uncertain.
• Fraud Risk: Smaller or less regulated SACCOs may be more vulnerable to fraud. Avoid SACCOs without proper licensing or oversight from the Sacco Societies Regulatory Authority (SASRA).

How to Choose a Safe SACCO

1. Check Licensing and Regulation: Only join SACCOs registered and regulated by SASRA. These SACCOs comply with government rules for safety and transparency.
2. Review Financial Records: Ask to see the SACCO’s audited financial statements to confirm stability and responsible management.
3. Look at Member Feedback: Speak to existing members about their experience with the SACCO, particularly on reliability in disbursing funds.
4. Understand Terms and Conditions: Check interest rates, withdrawal restrictions, and penalties. Some SACCOs may restrict access to funds before school term dates.
5. Diversify Savings: For critical payments like school fees, consider splitting funds between a SACCO and a bank account for added security.

Financial advisors recommend treating SACCOs as one of several tools to save for children’s education. While many SACCOs are reputable and trustworthy, due diligence is essential. Parents should never rely solely on one SACCO without verifying its track record and regulatory compliance.

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