17.01.2025
As many as 32% of working-age people in Estonia would not be able to subsist for more than one month if they lost their income, according to a Kantar Emor survey commissioned by LHV. Compared to 2022, this figure has doubled.
„The gap between people’s attitudes and actual financial behaviour is widening. Although the survey shows that the majority of Estonians consider it important to save up, 68% of respondents save less than 10% of their income. Unfortunately, the low savings rate makes Estonian residents very vulnerable to unexpected events,“ said Sander Pikkel, Head of Investment Services at LHV. Financial insecurity is highest among 25–34-year-olds, of whom as many as 41% would subsist for just one month if they lost their income. Conversely, this figure is 37% among 35–49-year-olds, and 26% for the 50+ age group.
A general recommendation to increase the sense of security is to build up a peace of mind fund that can cover at least 3 months of your expenses if needed. „A financial buffer is important to increase your preparedness to cover unexpected expenses – be it health costs, home renovation, or job loss. In a difficult situation, a peace of mind fund will help to maintain a familiar way of life, at least in the short term,“ said Pikkel. However, the survey showed that only 30% of working-age people in Estonia could manage for 3 months or more with their current savings. Only in 2022, the figure was 48%. The 35–49-year-old age group is particularly striking, with only 24% of people having more than 3 months’ savings. The survey also showed that the corresponding figure is 29% among 25–34-year-olds, and 37% in the 50+ age group.
The rapid increase in the cost of living in recent years has significantly reduced the savings of Estonian residents. At the same time, myths about saving and investing also persist. „Regular and automated contributions to a saving solution of one’s choosing is one of the most efficient and smartest ways to increase your future security,“ said Pikkel. Pikkel also dispels the myth that getting started with investing is only worthwhile if you have a thick wallet. According to him, the reality is the opposite. „It is usually a good idea to start with small amounts instead, to gain experience and learn. When it comes to investing, forming a habit of saving is the foundation for long-term success and a good predictor. Consistency is the key to building financial confidence,“ stressed Pikkel. He added that there is a large number of convenient and safe saving solutions in Estonia and that everyone is sure to find a suitable solution from the wide range.
Saving and investing should be considered a journey where you can take small steps forward. It is a good idea to plan your saving by the month and to set up automatic standing payments in the amount that suits you. For example, based on the average gross salary in Estonia of 2,000 euros, and aiming to build up a peace of mind fund that covers 3 months’ expenses (e.g., 5,000 euros) over 2 years, you should save just over 200 euros each month. „An even smarter way is to use a Savings Account offered by different service providers, where the person also earns a small amount of interest on the amount saved. This is leverage that helps a bit along the way to achieving the target,“ said Pikkel.
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