This year again, the French have kept huge sums in their current account. But with 6.2% inflation over 1 year, this bad habit could cost you more than ever.
Zero. No. What chi. Bullet skin. Waloo. This is, in short, what you earn from the money you keep in your current account. And yet… By negligence or perhaps by fear of the future, the French took the bad reflex to accumulate important sums on this non remunerated banking product.
At the end of October, French households thus accumulated more than €528 billion in the form of demand deposits, mainly placed in their current accounts. Either on average €17,600 per household. Or €9,430 per person aged 15 and over. Behind these average amounts, however, there are strong disparities.
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Loss of purchasing power
The phenomenon is not new. But with soaring prices, it becomes more penalizing. 24 months ago, give up 0.5% remuneration of the Livret A had no real impact on your purchasing power. Especially since inflation was then almost non-existent. However, the situation has changed.
Last November, consumer prices rose by 6.2% over 1 year, according to INSEE estimates. For several years, such levels had not been reached in France and in the euro zone. And this change is not without consequences for your finances.
For example, a basket of representative products and services that was worth €1,000 in November 2021 now costs €1,062. However, if you had deposited 1,000 in your current account on January 1, 2022, you now have… 1,000 euros. You have therefore lost 62 euros of purchasing power.
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The gap is widening
But that’s not all. Most of the rates for regulated savings products are calculated using inflation or the key rates of the European Central Bank (ECB). However, to stem the surge in prices, the latter has raised its rates several times over the past 6 months.
Since last July, the cumulative increase in ECB rates has thus amounted to 250 dots basic. Is the strongest progression recorded over such a short period of time since the creation of the euro, in 1999. The consequence? This is because the returns provided by regulated savings products have also increased.
The Livret A rate, for example, has gone to 1% in February 2022. Then, faced with high inflation, the remuneration for this savings account increased a second time in August 2022 to reach 2% annual net. And it doesn’t stop there: the Banque de France has already announced that a new increase is planned for February 2023.
The Livret A could then serve a yield of 3.3%. A return that had not been achieved since 2008. Same story for the People’s Savings Account (LEP), whose rate of return rose to 4.2% and could even reach 6.2%. Ditto for the Housing Savings Plan (PEL), which should see its remuneration double to reach 2% gross from January 1, 2023.
In other words, the gap is widening. The current account, unpaid, is not designed to hoard, but to pay your daily expenses. And if some individuals seem to have forgotten this truth in recent years, inflation should soon remind them of it.
Because it’s a fact: in 2023, keeping more money than necessary in your bank account will cost you more, while inflation over one year should reach 7% in January according to INSEE. But then, how much money should you have in your current account? “No more than a month’s salary”, the experts usually answer. To which can be added a small safety mattress to avoid an unexpected overdraft.
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