Have you ever heard of a money pool? Until now, we hadn’t either.
A money pool is a technique that people worldwide living in poverty (or close to it) have used for centuries to save for large expenses. Here’s the way it works: Each member of the pool contributes the same amount of cash each month. Then, they each take turns receiving the lump sum.
Francisco Cervera, a resident of Phoenix, saw the effectiveness of a money pool when funds were tight and he needed a computer for school. His mother saved for it by contributing to a money pool in San Diego that she ran (she was responsible for not only reminding people to pay, but collecting their contributions, too).
While money pools are a good idea since they provide access to savings for people who can’t use banks, Cervera thought they could be improved. So as an adult, he started eMoneyPool with his brother Luis. The online tool formalizes the money pool and provides guarantees for participants in case anyone misses a payment.
New users to eMoneyPool are limited to $100 contributions, and each savings group consists of five participants. The website verifies users’ identities, and even works to establish a credit history for them through their transactions — helping them work towards being able to use a more traditional financial institution in the future. “We are creating a bridge for our users to lending institutions, but we are doing it in a way that is comfortable and familiar to them, with money pools,” said Cervera told Pop! Tech.
“Saving money by yourself is a nice idea. But when you are living at the poverty level, everything is drawing on your cash,” said Cervera. “Money pools change the idea of saving because you are saving as a team…It changes the desire to save from a want to a need. People think, ‘Now I have to put that money away because the group is counting on me.'”