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Where to put your savings?
The right home for your money does not depend on the highest advertised rate, but on the date you will need it.
equivalent gross rate = net rate / (1 − tax)Problem / motivation
You have €2,000 set aside. The question is not “which rate is highest?” — that is a trick question, and this course is going to show why the investment with the highest advertised rate can leave you with LESS money than the one advertising less.
Investing is not saving. Saving is not spending; investing is choosing WHERE to put what you have not spent. And that choice never comes down to a rate, because three things matter at once: how much it pays NET (after tax and fees), how much you can lose, and on what date you will be able to get the money back. That third question — availability, or liquidity — is the one people forget, and yet it is most often the one that decides.
This course does not compute interest: the course “Compound interest” already does that, and “Return and risk” puts a figure on risk. It does something else, which neither of those does: it names the investments actually available in France, with their dated rates, their ceilings and their tax treatment, then gives the rule that lets you compare them — and an order of priority for the first few thousand euros.
Assumptions
In your view, which assumptions are needed for this model to hold? Jot down your ideas — no lead is wrong, this is your worksheet.
Your worksheet is still empty. Go for it: propose at least one idea.
0 idea(s) proposedFormalization
Here is the rule missing from most comparison tables. A Livret A, an LDDS, a LEP or a Livret Jeune pays its interest with nothing deducted: 1.70% advertised is 1.70% received. An ordinary investment — an unregulated bank account, a term deposit, bonds — is subject to the flat-rate withholding of 30% (12.8% of income tax and 17.2% of social levies): only 70% of it is left. To know what a taxed product must advertise merely to MATCH an exempt account, you turn the operation round: equivalent gross rate = net rate / (1 − tax), i.e. 1.70 / 0.70 = 2.43%. Remember that number: below 2.43% gross, a taxed investment pays LESS than a Livret A, whatever the marketing says.
A second deduction, more discreet, adds to the first: fees. Entry fees of 3% on €2,000 cost €60 — which is, exactly, more than a whole year of interest on a Livret A at 1.70% (€34). Management fees of 0.8% a year do not cost 0.8% of the result: they are subtracted from the rate every year, which, compounded, cuts heavily into the total (course “Compound interest”). So an investment is judged net of tax AND net of fees — otherwise the comparison is rigged from the start.
The capital of a regulated savings account is guaranteed by the state; other deposits are covered by the deposit guarantee fund up to €100,000 per bank and per depositor. At the other extreme, a share can lose half its value without anyone reimbursing anything. People often draw too quick a rule from this: “more risk, more return”. The first half is true — a high return REQUIRES accepting risk. The second is false: taking risk guarantees nothing. Risk concentrated on a single share, a cryptocurrency or a fee-laden product can be maximal and be rewarded with nothing at all. Risk is necessary, never sufficient.
That leaves the question that really decides. Professionals reason in this order: first clear expensive debts (an overdraft or a revolving credit costs far more than any investment pays); then build up PRECAUTIONARY savings of three to six months of spending, available within 24 hours, hence in a savings account; then, and only then, invest the rest, separating money for a dated project less than five years away — which must stay in guaranteed capital — from money you will not need for ten or fifteen years, the only horizon on which shares make sense. With €2,000, the answer therefore almost always lies in the second line. Click each term:
Solving / calculation
Let us move from the rule to the products that actually exist. Here is the map of French savings on 1 August 2026, then how to allocate €2,000 according to the date of need — that is, the answer to the title.
- The regulated accounts that are TRULY tax-free, guaranteed by the state
Livret A 1.70% (ceiling €22,950) · LDDS 1.70% (€12,000) · Livret Jeune, ages 12-25, at least 1.70% (€1,600)money available within 24 h, capital guaranteed, no income tax and no social levies - The LEP: the only product that is both safer and better paid — but rationed
2.50%, ceiling €10,000, tax-free, guaranteed — subject to an income conditionit beats the Livret A by 0.80 point: “safe AND better paid” does exist, but under conditions - TAXED investments: what is left after the withholding
an unregulated bank account at 2% gross: 2 × 0.70; a term deposit at 3% gross: 3 × 0.70; a CEL at 1.25% gross — regulated but TAXED (plans opened since 2018 fall under the PFU): 1.25 × 0.701.40%, 2.10% and 0.88% net — the bank account advertises MORE than the Livret A and pays less; the CEL, despite its regulated status, returns barely half of it - The threshold rule, applied
1.70 / (1 − 0.30)2.43%: that is the minimum gross rate for a taxed investment to be worth it - The long run, and its honest order of magnitude
shares: about 6.5 to 7% a year on average in REAL terms (inflation already taken out), measured over two centuries of mature markets — the United States first of all⚠️ a very long-run average, not an annual rate: over ONE year the standard deviation exceeds 20% (course “Return and risk”) - Allocating €2,000 — case 1: I might need it at any time
precautionary savings: Livret A, LDDS or Livret Jeune€2,000 in a regulated account → €34 a year, available within 24 h, with no risk and no tax - Allocating €2,000 — case 2: a project dated 2 years away (driving licence, deposit)
same answer: guaranteed capital is compulsoryover two years, a fall in the markets cannot be made up — return comes after certainty - Allocating €2,000 — case 3: no need for 15 years
only AFTER building the precautionary reserve: a diversified equity wrapper — in France the PEA (payments capped at €150,000, gains exempt from income tax after 5 years, but always subject to the 17.2% of social levies) or a unit-linked life insurance policy — paid in regularlythat is the only horizon on which risk has a chance of being rewarded
The answer to the title is not a product, it is a method in three steps. First, compare only NET rates: with the 30% withholding, it takes 2.43% gross to match a Livret A at 1.70%, which disqualifies most of the “super accounts” advertised at 2%. Second, look at the date on which you will need the money: below five years, the question of return comes after that of the guarantee. Third, respect the order — expensive debts, then three to six months of precautionary savings, then only the long run. With €2,000, that almost always means: a regulated account, and the LEP first if you are entitled to it. It is not the most exciting advice; it is the one the figures impose.
net if exempt = capital × rate; net if taxed = capital × [rate × (1 − 0.30) − fees]Compare two investments for the same sum: on the left a guaranteed, tax-free product (set the account's rate), on the right a taxed product whose advertised rate and fees you choose. Look for the tipping point — you will find the 2.43% again. Then look at the last line: what a risky investment becomes in a BAD year, which no advertised rate ever shows.
Economic interpretation
Three qualifications that investment comparison tables pass over in silence.
You read everywhere that a safe and profitable investment does not exist. That is false, and the counter-example is French: the LEP pays 2.50%, guaranteed by the state and tax-free, i.e. 0.80 point more than the Livret A. So the right formulation is: safe and well paid does exist, but under CONDITIONS and under a CEILING — the LEP is reserved for modest incomes and limited to €10,000, and it remains widely under-subscribed by those entitled to it. What does not exist is an investment that is safe, very profitable AND unlimited: as soon as a promise ticks all three boxes, look for where the hidden risk is.
“More risk, more return” is true in only one direction. Hoping for more forces you to accept risk; but accepting risk makes nothing more expectable. A single share, a cryptocurrency, a fee-laden product: the risk is maximal and the expectation often nil. What markets reward is the risk you CANNOT remove — the one left once you have diversified. The risk you inflict on yourself by concentrating your bets, nobody pays for (course “Return and risk”). That is the distinction between investing and betting.
The same product is excellent or absurd depending on when you will need the money. Shares on a fifteen-year horizon: reasonable, you have time to absorb the bad years. The same shares for a deposit to be paid in eight months: unreasonable, because a 20% fall cannot be made up in eight months. Conversely, leaving money meant for a retirement thirty years away asleep in a savings account is guaranteeing yourself a loss of purchasing power (course “Do your savings beat inflation?”). Hence the question to ask BEFORE looking at any rate at all: when will I need it?
Limits / critiques
Exercises
An unregulated bank account advertises 2% a year, taxed at the 30% flat rate. What is its NET rate (in %, two decimals)?
You have €2,000 in a Livret A at 1.70%. How much does it earn in a year (in €)?
True or false: an investment that is at once safe, better paid than the Livret A and tax-free does not exist in France.
In what order should a saver discovering their first few thousand euros proceed?
A Livret A pays 1.70% net. What GROSS rate must an investment taxed at 30% advertise to match it (in %, two decimals)?
You have a deposit of €1,500 to pay in eight months. Where should that sum go?
True or false: markets reward only the risk that CANNOT be removed by spreading your savings over a large number of securities.
The Livret Jeune, reserved for ages 12 to 25, is capped at €1,600 and its rate is at least that of the Livret A. For a 22-year-old student with €2,000, what should be made of it?