What is Livret A saving account in France? It is a special saving account regulated by the state. Why is so special? Because it has an attractive interest rate, availability, tax exempt and zero risk.
This explains why there are 55 Millions Livrets A in France, which is almost a ratio of 1 per person.
We have fallen in love as well with the Livret A since our early days in France and we will be explaining more details in this blog with you. Let’s understand more details about it…
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Why the Livret A saving account was created?
It was created 200 years ago with the intend to collect money from french citizens originally to pay debt of Napoleon wars, and lately to fund infrastructure & social projects (like building homes for low income families, etc). By end of 2022, there are more than 500 billions € collected, which indicates the success of this financial product.
What are the benefits of a Livret A saving account?
- Attractive Interest rate (3% as per August 2023 – see below the rate evolution during last years) – compared to standard savings account. However, bear in mind that compared with inflation rate (around 6% during 2023) your are still losing purchasing power. Notice that the interest rate is defined twice a year (15th February and 15th July) and it is correlated to the inflation and general interest rate in the EU zone.
Chart with ‘Livret A’ interest rate evolution during recent years.
- Full tax exempted. This is one of the few investment products in France that is exempted from revenue tax and social contribution tax. You do not have to declare anything in your annual tax return.
- Zero risk. Deposits are guaranteed by the state. Read more about how your money is guaranteed in France.
- No fees. Your bank cannot charge you any fees related to opening, maintaining or closing your ‘Livret A’
- Fully available. You can withdraw cash whenever you wish. There are no withholding period (like for PEA, Assurance Vie).
So now do you understand why ‘Livret A’ is so popular in France?
What are the prerequisites to open a Livret A saving account in France?
- Anyone can open an account! … Adults, children, nationals, foreigners, residents or not.
- The minimum deposit amount is 1,5€ (with ‘La Banque Postale’). There are no fees associated to open an account.
- You can only hold one ‘Livret A’ per person.
- You can not deposit more than 22950€. If you want to deposit more cash within a ‘similar’ saving account type, you may want to explore the LDDS (‘Livret de Développement Durable et Solidaire’) saving account, or LEP (‘Livret d’Epargne Populaire’), or the PEL (‘Plan d’epargne Logement’). Read our blog about what are the savings accounts in France.
- Note: interests are deposited at the beginning of the year, and it does not affect your deposit limit of 22950€.
- All national French banks can open an account for you.
Are there any constraints about the Livret A?
Yes, a few… The most important one is the fact that the interest rate is not matching the inflation rate (as per 2023).
Additionally, there is the deposit limit of 22950€, and the fact that you can hold only 1 account per person.
Besides that, it is important to mention that you cannot have neither a debit card nor a checkbook associated to a ‘Livret A’.
So, is it a good idea to open a Livret A?
We have opened a ‘Livret A’ saving account for each and we use it to place our short term cash needs. It fits well the purpose of an ’emergency fund’ (3 to 6 months of expenses for ‘just in case’) and / or to keep funds for future projects (like vacations, buying a new car, etc.). This will be a much better option than just leaving your cash sleeping in our current account earning ZERO.
Final tip: You should ask your bank agent to open one for you (or check if possible to do it online by yourself) as they may not proactively propose it as there is no commission for them ;).
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Please remember that we are neither financial nor tax advisors. We are just sharing our best understanding based in our own experience. This blog is for educational purposes only. Do not make investment decisions solely based on what you read in this blog. What works for us, may not work for you. Do your own research and look for professional service if required. Read our full disclaimer in the ‘about’ page.