How smart are Estonians with their money?

Text: Heli Lehtsaar-Karma, MTÜ Rahatarkus
Photo credit: Makalu from Pixabay

The latest nation-wide study of Estonian financial literacy reveales that the Estonian population has access to a relatively large amount of information about financial matters and also has sufficient basic knowledge to reasonably organise their financial affairs. But however there are still deficiencies that must be dealt with.

In June 2019, a study of financial literacy was conducted, concerning the financial behaviour, attitudes and knowledge of the Estonian population. Sample was 1005 adults aged 18‒80 years, the survey questionnaire based partly on OECD methodology.

Compared to previous similar studies the public’s theoretical financial knowledge has generally remained the same and declined in some areas. Behaviour has improved slightly, but there are still 1/3 of people not applying their financial knowledge to improve their family’s economic well-being and security.

Only few make plans for the long-term 

One of the most noteworthy deficiencies is that a large proportion of the population does not plan their financial affairs sufficiently (43% prepare a budget; this indicator is rising very slowly). Only 12% of the population makes long-term plans and investments. There are still a lot of people who do not save or have insufficient savings. The percentage of non-savers has been declining over the years, but change is slow.

The population’s assessments on their financial well-being 

Although 40% of the Estonian population have some finances left over at the end of the month, a substantially smaller proportion of people engages in investing. Almost a third of the population has experienced the situation where their running income does not cover their costs in the last 12 months. In that regard, 40–49 year olds are the most vulnerable age group. 51% would manage to cover a more substantial unexpected expense but 41% could not handle it.

Since only a small percentage of Estonia’s population engages in long-term investing, it is rather logical that 48% feel uncertain about their retirement and do not know whether they will manage financially.