Do you want to save and do not know which type of savings to opt for or which savings / investment product to choose? Find the solutions thanks to our explanations.
From the beginning, even without looking at the 3 types of savings, it is clear thatsaving is a necessity when you have financial goals to achieve. But in addition to putting your money aside, you need to carefully choose your savings product from those available. What are the 3 types of savings? Which savings or investment products can you choose for each type of savings? Before we answer these questions, let’s quickly find out what savings are and why you should use them.
There are different types of savings depending on the objectives and investment horizon of savers. Each savings product has a specific purpose and a specific tax envelope. A distinction must therefore be made between savings precautionRescue project and savings retirement. Let’s see the differences between these 3 types of savings!
1. Precautionary savings
Still called liquid savings, precautionary savings are a buffer that allows you to cope with the unexpected. It helps you build a financial reserve you need in case of expenses or exceptional situations. It can be a job loss, a vehicle breakdown, a health risk or an emergency, etc. The financial supports offered are accessible at any time and placed in tax envelopes that offer immediate liquidity.
Where to keep your precautionary savings?
Banks offer dedicated precautionary support, both through online and traditional savings. We often talk about bank savings accounts or liquid and safe investments. As this is a bank investment, the rate of return on these brochures is quite low. However, the total amount of the passbook must not exceed six months in real value.
What are the types of precautionary savings accounts?
There are different types of precautionary savings books and banks allow you to choose the one that best suits your needs and preferences. The table below gives you an overview of the best brochures on the market.
|A booklet||€ 22,950||0.5%||Available at any time|
|Youth pass (-26 years)||€ 1,600||1 to 2%||Available at any time|
|PEL (Housing Savings Plan)||61,200 euros||1%||Available at any time|
|CEL (housing savings account)||€ 15,300||0.5%||Available at any time|
|LDDS (brochure sustainable and solidarity development)||€ 12,000||0.5%||Available at any time|
NB. Super passbook accounts (passbook accounts) have no ceilings determined by the state. Each banking institution has the right to issue its own super savings account. The interest rate is 30% and is part of the flat tax.
2. Project savings
The project savings allow you to do so set aside money for a project. The scope of this positioning is quite broad. You can opt for this type of financial savings to buy an apartment, expand your real estate assets, invest in a new vehicle, etc.
All your projects find their field of expression at this level. You can choose between different savings vehicles, each one different from the other. Unlike precautionary savings, which can be accessed at any time, project savings extend beyond the middle term.
Where to keep the savings of your project?
The saver has access to various investment supports offered by banks or insurance companies. Each of these means has a well-defined investment horizon, ie between 3 and 10 years. It must be said that all the proposed financial allocations they do not present the same level of risk. Between the defensive profile, the moderate profile and the offensive profile there are known specificities. Your choice of medium or savings product will depend on your goals and investment horizon. Here are the best storage media for project savings in the following points.
Life insurance is the most popular and most used vehicle for project savings. It offers very attractive taxation and many other benefits. Freely managed life insurance, for example, protects your capital thanks to investments in Euro Funds. However, to benefit from all the benefits of life insurance, you need to opt for an 8-year contract.
Guaranteed UCITS are a fairly attractive investment in terms of return offered by the undertaking for collective investment in transferable securities (UCITS). The duration of the investment varies between 3 and 5 years with the added value of the capital gains depending on the evolution or performance of a stock market index.
The PEA (Equity Savings Plan)
The equity savings plan or PEA is an investment vehicle that allows you to invest in stocks on the stock exchange. It offers sustainable and attractive taxation with an investment horizon of at least 5 years. Keep in mind, however, that the risk is greater with stocks than with bonds.
This project savings solution allows employees to participate in the success or achievement of the company’s expansion or development goals. This savings is supported by the Pacte law and the employee has two investment options: the Retirement Savings Plan (PER) or the Corporate Savings Plan (PEE). The investment horizon is 5 years and the return depends on the chosen investment vehicle (PEE or PER).
This support operates according to the same principle as the first type of UCITS, with the only difference that concerns the investment in bonds. Here, the risk is lower than with equity investments. On the other hand, the return on investment is lower than that of stocks.
Crowdfunding is also another very popular investment vehicle. Part of your savings is invested in an investment niche that you have chosen together with other savers or investors. The duration of the investment is between 3 and 5 years. The rate of return is quite attractive, usually around 4.5-6% gross per year.
NB The choice of the project’s savings vehicle must take into account the investment horizon, so that the funds are available on time. Some online savings means and solutions even allow you to define a bespoke project (based on your resolution, but also on expert advice), follow its progress and even modify or change said savings project.
3. Retirement savings
Retirement savings allow you to prepare well for retirement in order to have the opportunity to lead a decent life after retirement. She offers very attractive financing prospects for his retirement. Earnings depend on the number of contribution years. This is why workers are encouraged to start this type of savings a little earlier. Retirement savings are a long-term investment, i.e. starting from 10 years.
Where to keep your retirement savings?
As with previous savings solutions, banks and companies ofinsurance offer reliable and secure storage solutions. Payments for this retirement savings solution are made with a frequency specified in the contract. Savers are counted among all social organizations. Here are the best retirement savings products.
The Pension Plan (PER)
PER is a savings investment specially designed to prepare for retirement. It allows you to enter a sum every month for your entire career on your PER. You can decide on different types of investments depending on the level of risk you are willing to take to increase your savings. Of the tax advantages make this investment a great savings choice with a long-term view. When the time comes, you can unlock in full or in the form of a monthly pension until your death. In the latter case you will live longer and the more interesting it will be. Find out more about his operation and its advantagesconsult our dossier on the PER Pension Plan.
This means of saving allows you to enhance your investments until the time of withdrawal of the funds. Units of Account are highly recommended at this level for your payments. The taxation here takes into account the year in which the life insurance account was opened. Also, you will benefit from it annual deductions after eight years approximately € 4,600 (single) or € 9,200 (married).
The equity savings plan (PEA)
The PEA also allows you to enhance your investments for a safer retirement by relying on controlled investments in equities on the stock market. Earnings under the PEA are tax-free five-year ownership of the plan. Only social security contributions of 17.2% apply and not income tax. But before the five years of imprisonment, in the event of withdrawal or closure of the plan, you are taxed at 12.8% on income in addition to social security contributions, or 30% tax.
NB. For substantial retirement savings, it is recommended that you sign up for a savings solution as soon as possible.
What is a savings?
Saving is a prosaically portion of your income that is not spent and is set apart. According to INSEE, this is the share of household income that is not used in final consumption expenditure. This share is the main source of funding for capital expenditure. Economists present household savings as the pillar of economic growth over time.
According to some studies, about 15% of French income is set aside every month. They are also among the best European savers. Most often, savings are withdrawn after the assessment of monthly expenses. These are current expenses such as rent, electricity, food, leisure, school, etc. The financial saving is therefore theexcess income which was not allocated to current expenditure.
The principle is therefore that of shop this excess money in a safe place, such as a bank. Bank savings therefore consists in insuring the unused portion of income in a savings account. Banking institutions offer various means of investing money. You can accumulate savings in a regulated passbook or outside passbooks.
READ ALSO: Investing in SCPI to invest your savings: what are the advantages?
Why use savings?
Financial savings have several advantages. She is a guarantee of safety in any type of situation. But that is not all! Saving money allows you to:
- Anticipating some hard blows in life while building a precautionary foundation (job loss, disaster, illness, etc.)
- Ensure the long-term education of his offspring (school, university, etc.)
- Implementation of projects (entrepreneurship, buying a car / house, etc.)
- Leisure (holidays, tourism, etc.)
- Guarantee / complete retirement
For more information, consult the “Money – Taxes – Consumption” guide of the public service: https://www.service-public.fr/particuliers/vosdroits/N19803