Here is the usefulness of precautionary savings, especially in these times of inflation. Thanks to investments, you avoid unpleasant surprises.
Definition and usefulness of precautionary savings
It often happens that an unexpected expense arises just when we are short of money. In this context, precautionary savings is the solution. The principle is simple, you must save a certain amount of money per month in order to use it when needed later.
So, if your car breaks down or household appliances stop working, you can draw from this reserve. The usefulness of precautionary savings is therefore justified by the fact that you will no longer need to resort to consumer loans.
Usefulness of precautionary savings: how much should be put aside?
However, several factors must be taken into account if you want to build up this reserve. Already you have to do the calculation from your age, to see until when you can save. Then, you have to consider your family and professional situation, as well as your income. In addition, you must assess your fixed costs per month before determining the exact amount.
For a couple, it is advisable to set aside 10% of their income. The usefulness of precautionary savings will then be justified by the sum amassed after a few months and to which they will have access. However, it is not necessary to save your whole life. Keeping a margin of 3 to 6 times the sum of the household’s monthly operating budget is sufficient.
The best investments of 2023
Normally, you can save money directly in your checking account. But this solution does not present much interest, especially since you might be tempted to dip into this reserve for minor expenses. Thus, it is better to make short-term investments, because they allow you to generate profits over time.
However, do not put your money in blocked accounts, because the usefulness of precautionary savings is precisely that it is easily accessible. Regulated booklets are therefore the final solution, especially in 2023. Indeed, the funds are easily accessible, without too many procedures, and the interest rates are very attractive. Thus, you can opt for the LDDS or even the Livret A. Moreover, compared to the latter, the interest rate could still increase this year according to economists.