According to a study by Kantar Emor, commissioned by LHV, if their permanent income were lost, 32% of Estonian working-age residents would not be able to survive for more than one month. Compared to 2022, this figure has doubled.
“The gap between people’s attitudes towards finances and their actual behavior continues to grow. Although the majority of Estonians consider saving important, 68% of respondents save less than 10% of their income. Unfortunately, the low level of savings makes Estonians very vulnerable to unexpected circumstances,” said Sander Pikkel, head of investment services at LHV.
The greatest financial insecurity is observed among people aged 25-34, of whom 41% will be able to survive without income for just a month. In the age group 35-49 years old this figure is 37%, and among people over 50 years old – 26%.
Creating a financial cushion is the key to stability
Experts recommend creating a financial cushion that, if necessary, will allow you to cover expenses for at least three months. “A financial reserve is important to be prepared for unexpected expenses, be it medical expenses, home repairs or job loss. The airbag helps to maintain the usual way of life, at least for a short period of time in a difficult situation,” explained Pikkel.
The study showed that today only 30% of working-age residents of Estonia have savings to cover expenses for three months or more. In 2022, this figure was 48%. The decline is especially noticeable in the group of 35-49 years old, where only 24% have savings for more than three months. Among 25-34 year olds this figure is 29%, and among people over 50 years old it is 37%.
Impact of rising cost of living
The sharp increase in the cost of living in recent years has significantly reduced the amount of savings of Estonian residents. However, many myths about savings and investments persist. “Regular and automated contributions to a qualified savings vehicle are one of the most effective and smart ways to strengthen financial stability,” said Pikkel.
Pikkel recommends viewing the accumulation process as a long-term path along which you should move in small steps. It’s a good idea to plan your monthly savings and set up automatic payments for the appropriate amount. For example, with an average gross salary in Estonia of 2,000 euros and a goal of creating a financial cushion of 5,000 euros in two years, you need to save just over 200 euros per month.
“An even wiser solution would be to use savings accounts offered by various services, where interest is charged on savings. This is a small but useful bonus that will help you achieve your goal faster,” said Pikkel.
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Source: www.dv.ee
