How much liquidity should you keep in your current account in order not to lose money? There is clearly no limit to the amount of money to keep on checking accounts. As free stock and therefore immediately available. But in reality there is an invisible enemy that erodes the purchasing power of your working capital.
This is theinflation which can only be fought by managing to revalue capital. At least in line with the annual increase in the cost of living. So, here’s the real cash you should keep in your checking account. Just in order not to lose money.
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Here is the real cash you should keep in your checking account to beat the devaluation
Leaving money in your checking account thinking you won’t lose money is a mistake. The capital is in fact safe, because there are no investment risks. But in reality the 100,000 euros still on the current account today? How much will they be worth in 10 years?
It will always be € 100,000 net of current account maintenance costs. Almost. Suffice it to say that with an average annual inflation of 2% how much money in the current account is devalued? After 10 years? By almost 22% using the compound interest formula.
Because keeping too much money in the account for a long time is not convenient
No one is certainly willing to suffer the aforementioned loss. Which is in all respects like an investment that has gone wrong. So what to do? In general, the real liquidity to be left on the current account should not exceed 12 months. That is your own and family’s financial needs for 1 year. The rest should be invested in line with your risk profile. In the short, medium and long term by diversifying. Because that invisible enemy called inflation must be defeated.
Also beware of guaranteed deposits in the event of a bail-in
In addition, the risk that the bank where you opened the current account will go into crisis must be estimated. And in the event of a bail-in, deposits are guaranteed but only up to 100,000 euros per holder. Thanks to the Interbank Deposit Protection Fund. While any excess is potentially attackable by the credit institution. When he resorted to the procedure of internal rescue.
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