Why Playing It Safe With a Livret A Could Cost You in the Long Run

Layering savings and investments strategically around your life’s needs can overcome inheritance concerns and result in financial freedom, says Daniel Butcher

There are plenty of savings and investment options available in France. Some are short-term and safe, others are long term and strategic. While many just leave their money in their bank’s Livret A – they are familiar and tax free after all – this isn’t the most efficient option for long-term planning. 

“Knowing how to balance cash reserves, investments and estate planning tools is a real challenge, but making such deliberate decisions, based on your life’s circumstances, is how to create your financial security,” said Daniel Butcher, founder of DTB Wealth Management.

“An extra complication for expatriates is that some accounts have tax or inheritance implications that are not obvious at first glance,” he added.

So what is the best way to plan your finances? An optimal setup usually includes these four pillars: putting three months of emergency expenses into a Livret A or its cousin LDDS; placing funds for near-term projects into a flexible savings account like the CSL (Compte sur Livret); using assurance vie (AV) as the cornerstone of long-term planning (targeting the Luxembourg AV if you have over €250k to invest); and generating income during retirement via an SCPI.

Livret A and LDDS are excellent for emergency funds, paying 1.7% tax free, although deposits are capped at €22,950 and €12,000 respectively. However, overfunding later in life may expose families to forced heirship.

For short-term goals like buying a dream home, the CSL offers a simple parking spot for cash – and although the rates are low, it avoids inflation erosion in the short term.

“Beyond that, the focus should be on AVs, France’s flagship investment wrapper,” said Daniel. “Delivering steady yields of 4-5% a year, they allow growth, income and efficient estate planning, with significant allowances for beneficiaries if contributions are made before age 70.”

He added:”A Luxembourg version is particularly suitable for wealthier clients as it offers full capital protection and avoids Loi Sapin 2 restrictions.”

Overall, successful financial planning in France is about balance. Keep cash for emergencies, but rely on AVs and SCPIs for long-term growth, estate efficiency and income. Investors who stick only to Livret A accounts risk missing out on the real advantages of the French system.