The French continue to hoard money, favoring risk-free investments
The repercussions of the health crisis, exacerbated by the Russia-Ukraine conflict, continue to influence how the French approach saving. Households are maintaining high savings levels, concerned about an uncertain economic and geopolitical climate and inflation—which, although declining, is eroding their purchasing power. Financial planning for retirement—which is viewed as a more distant prospect and a less lucrative one—is also a major concern.
According to INSEE, the savings rate in France stands at 17.9% of gross income, 2.3 percentage points higher than in 2019. The institute forecasts that this level will hold steady in the first half of 2024. These precautionary savings are primarily directed toward risk-free investments, a trend that is expected to continue. In fact, in the latest AMF/Audirep savings survey from late December 2023, 38% of respondents were considering a guaranteed investment for the next 12 months, compared with 11% for stocks, 7% for diversified real estate investments, and 6% for cryptocurrencies.
However, prioritizing risk-free investments does not provide optimal long-term returns or the best protection of purchasing power. The 2024 study by the Institut de l’épargne immobilière & foncière (IEIF) on long-term investment performance demonstrates this. Over a 40-year period (1983–2023), stock market investments performed the best, with an internal rate of return (IRR) of 12.4% for stocks. Real estate also stands out for its performance, with an IRR of 10.4% for residential properties in Paris, outperforming other asset classes such as publicly traded real estate companies, OPCIs, SCPIs, and euro-denominated life insurance funds.
Stéphanie Galiègue, deputy director general of the IEIF, points out that the macroeconomic environment has changed over the past two years, with economic growth persistently sluggish and interest rates on the rise. This new paradigm is now said to favor asset classes with a significant income component that can be indexed to inflation, such as real estate.
The French continue to favor risk-free investments for their savings, despite the superior long-term performance of stocks and real estate. The uncertain economic and geopolitical environment, as well as concerns about retirement, continue to influence their saving behavior. However, the shift in the economic paradigm could favor asset classes that take societal and environmental changes into account, such as Green Europe stocks and healthcare real estate.
