A current account is a useful solution for your daily expenses, as the latter is directly linked to your bank card. On the other hand, if you want to put your money to work, it’s a very bad investment: it won’t pay off.
If the banks do not hesitate to deposit this money to generate interest for their personal account, the customer will not benefit from it (most likely, he will ignore it). It is for this reason that it is advisable to leave only the minimum amount in this account.
Livret A, an alternative… wage
You’re lucky enough to have risk-free and generous-paying investments in France to leave your money in a current account. This is an example of a Livret A that allows you to touch 3% net per annum from February 1, 2023.
This government-guaranteed savings account allows you to deposit up to 22,950 euros. If you have excess capital, you can transfer a part to LDDS paying the same amount and its ceiling is 12,000 euros. Ultimately, this allows you to invest almost 35,000 euros in savings at 3% net per annum, risk-free.
In general, we say you should leave a month’s salary in your current account – this allows you to have enough flexibility for the unexpected. Everything else you have to put into paid employment. Livret A has the advantage of allowing withdrawals (and deposits) anytime and for free. Additionally, only 7% of the 55 million Livret A accounts have reached the ceiling.
A reign of fifteen days
But why transfer money from your current account to Livret A before the end of March? Because the interest on this savings account follows the “Fortnightly” rule.
As the Banque Populaire website explains, “Interest on your savings account is calculated twice a month. Amounts paid within a fortnight (16th of the same month or 1st of the following month) of payment or transfer shall bear interest. Similarly, withdrawn amounts “shall cease to attract interest from the first day of fortnight (1st or 16th) of withdrawal”.
More specifically, if you want to earn a full month’s interest, you need to deposit it before the 1st of the month. In other words, if you invest your money on April 1, your savings will be paid from April 16 (second half of the month). So you will lose interest for 14 days. It is for this reason that it is better to deposit your money by the end of March – instead of waiting until the beginning of the following month.
Within a year, the Livret A rate was tripled by the Ministry of Economy and Finance from 1 to 3%. If this wage is still lower than the actual inflation calculated by INSEE, it is at the highest level since 2008.
According to predictions and Official calculation rule, the Livret A interest rate may even increase to 4% from next August. If you want to increase your money by then, it’s in your best interest to deposit it into your Livret A and not your current account.