The Praxis study presented today, on January 15, on behavioral aspects of saving in Estonia encourages people to focus more on long-term savings, and urges service providers to introduce unnoticeable saving measures and offer impartial finance counselling.
The study was inspired by the notion that Estonians’ expectations regarding maintaining their current living standard during their retirement age are high, whereas their present saving habits offer no guarantees that such expectations would be fulfilled.
“It is known that solidary social insurance system will not completely cover our expectations in the future, but people still to do not sense the magnitude of personal responsibilityâ€, Praxis Economic Policy Analyst Anne Jürgenson explains.
According to Jürgenson it is vitally important to raise people’s awareness on the importance of savings in relation to reduced social risks such as long-term health problems, inability to work etc. It can often happen that risks come into effect simultaneously and aging plays a relevant role here.
“Awareness raising alone is not enough, because even if people become informed, they do not always act accordinglyâ€, the analyst remarks. “In reality, the decision to save is in constant competition with the decision to consume and we all sense the social pressure to consume moreâ€, the think tank analyst noted and added that very often decisions to consume are made based on the desire to belong to a particular social group.
“Here the state could play a much bigger role- discuss the topic in the media, turn saving habits into an everyday discussion topic among people, make saving popular and valued by using more effective measures such as TV shows or finding speakers that are trustedâ€, Jürgenson explains.
The authors of the study also wish to introduce the so-called unnoticeable means of saving and offer impartial financial counselling. A simple and unnoticeable way to save would, for example, be the employer depositing part of the pay on payday directly to the employee’s savings account. The state could in turn create additional benefits that would motivate more employers to use the employer pension scheme.
According to pension study by the Swedbank Institute of Private Finances, Estonians feel that pensions should be circa 70% of the last salary. At the same time 1st and 2nd pillars of the pension fund provide only about 40% compared to income before retirement.
According to the manager of Private Finances Lee Maripuu, this means that there is a huge discrepancy between expectations and reality. “Not much is known about the state saving pension and it is also not widely trusted. When it comes to retirement, many people put their trust in non-monetary solutions such as relying on the support of relatives and ability to continue workingâ€, Maripuu mentioned other important details from the study and added that Estonians do not have a long-term saving strategy or financial buffers in cases of emergencies.
In the joint study of Praxis and Swedbank  on Behavioral aspects of saving and options of influencing Estonians’ saving habits representatives of different social groups (young people, parents, households with and without loans, elderly working people etc.) were interviewed and asked to assess their long-term saving habits and potential measures influencing saving behavior.
You can find the report here!

Anne Jürgenson
Economic Policy Analyst