What's New

Creating an Income Spike, Part II: Savings Groups

by Julie Siwicki of the Financial Access Initiative

A recurring theme in USFD research is that low incomes are often volatile incomes. To cope, some households create predictable income spikes through tax refunds and credits. Others buffer against uncertain income by saving up lump sums. We see that people can get creative to mitigate the difficulty of saving money on a low and volatile income. Savings groups are one common, informal strategy to help households save.

According to USFD’s informal finance brief, savings groups “collect deposits from members in fixed amounts on a fixed schedule, and the money goes into a group pot. In most [groups], the pot is fully disbursed to a single member each turn.” A cycle typically ends when each group member has received a payout once.

Twenty households in our sample participated in savings groups.  Around 70 percent of the groups were observed in Hispanic immigrant communities, and the rest were used by African Americans in NYC.

How often did people contribute to their savings groups? Most made deposits weekly, bi-weekly, or monthly as seen in chart 7.8. How much did they contribute? Chart 7.7 shows that the median deposit value was $100. These relatively small payments added up to a median payout value of $1,000. Chart 7.5 illustrates how one woman, Melinda, made monthly contributions of $800 ($200 per week) that added up to a $6,400 payout.

The simple structure of savings groups can mask more complex informal transactions that occur beneath the surface. By tracking cash flows tied to both Melinda’s savings groups and her loans with family members, USFD saw how she sometimes borrowed from her sister to make deposits during weeks she was short on cash. See chart 7.6 for a monthly breakdown of this informal dynamic.

Savings groups let households exercise a modicum of control over otherwise volatile financial lives. For more, see the Financial Access Initiative’s recent deep dive into what these groups can teach the formal financial services industry.


This is part of a series explaining initial findings from the US Financial Diaries. The project is lead by principal investigators Jonathan Morduch (NYU) and Rachel Schneider (CFSI).  Julie Siwicki was a field researcher with the project and is now a research associate. The views expressed therein are those of the author, and not necessarily of the USFD project or its funders.