Beneficial financial habits are set to return as interest rates for regulated savings accounts will decrease starting February 1, 2025. Livret A will drop to 2.5% from 3%, and LEP to around 3% from 4%. With inflation anticipated to rise, it’s essential to optimize interest earnings. Strategies include maximizing contributions to the most rewarding accounts, timing deposits effectively to capture interest periods, and automating transfers to ensure savings growth while managing expenses.
The return of beneficial financial habits is on the horizon! Starting February 1, 2025, the interest rates for your regulated savings accounts, such as Livret A, LDDS, and LEP, will be adjusted downwards. We’re expecting a drop to 2.5% for Livret A, a decrease from the current 3%, and a likely reduction to 3% for LEP, which is currently at 4%. This decline could worsen with the Bank of France’s forecasts suggesting inflation may rise to 1.6% next year. Such changes will have a notable effect on the interest earned from these accounts, as they are linked to inflation rates.
Given this situation, it’s crucial to safeguard every euro of interest earned from your valuable savings accounts. Below are some effective strategies you can implement to optimize your interest earnings in the upcoming year.
Maximize Your Most Rewarding Account
First and foremost, focus on maximizing the balance in your most lucrative savings account. If you hold both a Livret A and a LEP, prioritize funding the LEP to its maximum limit, even if it means reducing your Livret A balance. Moreover, if you also have a regular bank account or a high-yield account, you should note that the net yield of Livret A could outperform those options. If your regular account does not yield at least 4.2% now or 3.6% after February 1, your Livret A’s interest will likely be more beneficial after accounting for the 30% flat tax.
For those fortunate enough to receive holiday cash, now is the time to act decisively. A fully funded Livret A can generate up to 57.375 euros in interest for January alone. Similarly, if your LEP is at its ceiling of 10,000 euros, you can earn an additional 33.33 euros in interest for its last month at 4%. To further enhance your interest earnings, consider creating a budget: keep only what you need for monthly expenses in your checking account and allocate the surplus to your savings accounts.
Optimize Your Transfer Timing to Capture Every Interest Period
Wondering when is the best time to transfer funds to your Livret A, LDDS, or LEP? The answer is indeed yes—timing matters! Interest for these accounts is calculated bi-weekly (on the 1st and the 16th of each month). However, deposits only start accruing interest after being in the account for a full fortnight. Therefore, it is advisable to make deposits the day before a new fortnight begins: either on the 30th or 31st of the month to ensure they are recorded on the 1st, or on the 14th or 15th to start earning interest for the upcoming period.
To make sure you never miss a fortnight, consider setting up scheduled transfers. You can automate a transfer through your banking app or client portal on the 30th or 14th of each month—perhaps both! This not only helps you capture every interest period but also alleviates the mental load of saving, ensuring you have funds set aside after handling monthly expenses.