(Image credit: Unsplash – Adeolu Eletu)
Inflation is on everyone’s lips, reminds us when we’re shopping or filling up, and has been in the headlines for a few months. Very present in our daily lives, it should also make us review our personal finances and our investments, particularly with regard to our use of regulated savings accounts. Inflation should be reflected in a number of regulated savings accounts on August 1st. Which ones are affected? How high will the newly proposed rates be? Is this good news for savers? What attitude to take? All our explanations.
Book A, a great classic
When we talk about regulated saving, the first thing that comes to mind is the savings book A. This great savings classic with a minimum payout of 10 euros and a maximum of 22,950 euros is a guaranteed investment that is very advantageous from a tax point of view, since the profits are not taxed with income tax or social security contributions. However, the return on the investment is relatively low. The interest rate on the Livret A savings account has been fixed at 1% since February 1, 2022 and will increase to 2% on August 1, 2022, announced the Minister of Economy and Finance, following the recommendations of the governor of the Banque de France , France.
Also Read: Increase in Issue A: Should You Reinvest in This Investment?
The brochure Sustainable and Solidarity Development, an additional cover
The Sustainable and Solidarity Development brochure or LDDS can supplement the A brochure when it is full. Again, this is a guaranteed regulated savings account that allows you to get back the amounts deposited in your savings account at any time without prejudice. The minimum payment for an LDDS is 15 euros and the ceiling, which is much lower than booklet A, is only 12,000 euros. Note that the tax benefits are identical to Book A, as is the compensation. The interest rate reported by the LDDS is therefore likely to rise to 2% as of August 1, 2022.
The Livret d’Epargne Populaire, reserved for the humblest
The Livret d’Epargne Populaire, or LEP, is also a regulated savings account that is exempt from any taxation. Its minimum payment is 30 euros, while the ceiling of this envelope is set at 7,500 euros. This guaranteed investment is accessible under income conditions that depend on the number of shares in the family quotient and that vary according to the place of residence (Metropolis; Guadeloupe and Martinique; Réunion, Guyana, Mayotte). The LEP rate has been 2.2% since February 1, 2022, but like other regulated savings accounts, an increase is scheduled for August 1, 2022 that will bring the new rate to 4.6%. In fact, the LEP rate is equal to the Livret A rate increased by 0.5 points (2.5% therefore on 1 August 2022) or to the half-year average of inflation over a year if higher, ie 4.55% if we take this into account the INSEE figures. This figure has been rounded to 4.6%.
Savings account: a top-up that does not cover inflation
In any case, livret A and LDDS like LEP, the interest rate as it has been in force since February 1, 2022, like the one we can benefit from from August 1, 2022, does not allow inflation to be covered. In fact, the consumer price index has been growing steadily for several months, reaching 5.8% over a year in June. Seen over the whole year, it should be over 5%! In this context, it becomes clear that the revaluation of regulated savings rates is not sufficient to cover inflation. So not only can you not make money from these savings accounts in absolute terms, but they actually cost money to those who use them.
Bank books: Limit investments as much as possible
It is therefore essential to reserve regulated savings accounts for setting up and managing retirement savings. Because these savings accounts have guaranteed capital and are accessible at all times, preference is given to using them for the emergency fund to cover any unforeseen expenses (car mechanic, vet, plumber, locksmith, etc.) Checking account, which is not at all.
If you can, you can also use the Savings Book A, LDDS and LEP to fund your short-term projects like financing vacations, buying a car, etc.