Got a savings goal? Consider forming a savings circle

A breezy January morning made the mid-30 temperatures feel even chillier. But it was an important day for the young man pushing 30 himself . He was about to face his entire family to ask for a loan to seed his new business idea.

He had contributed to the family’s savings circle, but he was asking for a withdrawal this time.

WHAT IS A SAVINGS CIRCLE?

A savings circle is a group of family members or friends who regularly contribute to a collective fund. Members gain access to a share of the proceeds on a rotating basis or as needs arise.

A savings circle can also be called a money pool. Or flip the benefit, and it’s known as a lending circle. The practice carries many names worldwide and among American immigrant communities, including tanda, sou-sou or tontine.

It can be an informal gathering with regular monthly contributions and one disbursement or one individual’s request for funding approved by the group. Some savings circles predetermine automatic withdrawals for each member in a particular order.

THE SAVINGS CIRCLE THAT ROCKED THE WORLD

Berry Gordy was 29 that cold Detroit day in 1959 when he faced the family’s pointed questions regarding a $1,000 loan from the Ber-Berry Co-op — named after his parents, Bertha and Berry. After a lengthy discussion, the group voted to give him $800.

And with that seed money, Motown Records was born.

David Ellis, a digital media curator at the Motown Museum in Detroit , says Gordy’s parents created the savings effort to help seed family business ideas. Each family member, including spouses, contributed $10 monthly to the fund.

“The funniest part … is the interest that Berry Gordy had to pay. They were family, but they were still very professional people,” Ellis adds.

Unlike many...