People do stand ready to save; even so, to develop saving habits, they need a helping hand or some kind of trigger, as revealed by fresh study by Praxis, a centre for policy studies. For many, the trigger was provided by painful lessons of recent recession.
Saving habits beg push to improve
Today, Praxis presented its fresh study, Behavioural Aspects of Saving and Options to Impact Savings Behaviour of Estonians.
«People are not aware that, at pension age, a large gap will appear between the expected income and reality,» said Praxis analyst and an author of the work Maris Rell, while explaining the aim if the study. The study, ordered by Swedbank, was co-authored by Anne Jürgenson, Mihkel Nestor and Priit Tinits.
«The current pensions system provides for 40 per cent of former income, but people believe or hope that they will be receiving more,» said Ms Rell.
According to former studies, inhabitants of Estonia think that, in the future, their monthly pension might amount to an average of 74 per cent of salary. «They are hoping in the so-called solidary pensions system, but are not assuming personal responsibility regarding the missing 30 or 40 percent. Our message is that people should take responsibility regarding that other part,» explained Ms Rell.
Ready to save
Saving is behavioural: people do have certain stands and attitudes towards saving, but that alone is not enough, they will have to change behaviour. In their studies, psychologists have attempted to find out the options to alter behaviour. Considering these options, authors of the study developed saving solutions possibly offered by banks, for instance.
«While talking to people, it became evident they stood ready to save; even so, with many the pull of the trigger seems missing. To pull the trigger, banks might come up with reasonable products; or else, a personal negative experience may do the job,» said Maris Rell. «After the recession, for many the trigger was pulled, and they started to save,» she added.
«Up to the recession, there were no savings. Luckily, people had the option of credit lines. Meaning: we do have the painful experience,» confirmed a participant in the survey.
For a long time, it used to be known that Estonians had low levels of financial literacy and security. A study by Saar Poll, dated two years back, showed that only 30 percent of inhabitants could, in case of losing main source of income, make it for three months without taking a loan; an equal amount of people would make it for less than a month.
Campaign might help
55 per cent of population say they have savings. During the past five years i.e. post-recession, in one way or another, about two thirds of inhabitants have saved money. In Swedbank’s estimation, 90 percent of savings are made up of deposits and 2nd pillar pension funds; investments into UCITS (undertakings for collective investment in transferable securities), quite the norm in Western Europe, is marginal in Estonia.
People interviewed within study agree that, among the people, the overall awareness of savings is rather high. They think the habit to save should start at home, by example set by parents; even so, the school also plays a big role.
Of all the ideas suggested by researchers, those interviewed considered it best to arrange a media campaign to popularise saving. They also liked exemplification of costs i.e. setting labels to certain expenses; even so, young Estonians unanimously condemned the idea.
«I did try that. It does breed stress once you see how much you spend on something meaningless,» said a respondent.
As another solution, a goals calculator was suggested: into it, a person might enter the desired monthly pension, thereafter shown how much should be set aside every month to achieve that. Also, the calculator would issue advice on how to reach the goal.
Regarding personal consultation in banks, people were quite critical. As a negative, they pointed to differing levels with customer service. Also, the banks offer varying services, geared towards consuming and saving alike, all at once.