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Master's Thesis: "Youth saving habits in Estonia" (18-35a)



   Our lives in our early life can change the future in many ways. School system as they are a big step in getting knew knowledge and of course our parents. Financially speaking both of these are very important in creating saving behaviors among youth. Some habits are coded in our genes, but the rest of it is created when we are teenagers or even earlier.


  The objective of this study is to identify and measure the effect of schools, parents and lifestyle to savings behavior and financial literacy, in order to see positive effects on saving habits and making rational financial decicions. In order to reach the objective a survey was created and sent out to thousands of people between the ages of 18-35. Gladly little bit over thousands of answers made it easier to write hypothesis and create five different econometric models, which were analysed by ordinary least square, ordered logit and binary logit methods.


  This study included five different econometric models, which were supposed to test specific hypotheses. When modles had statistically significant variables, then these factors were described the impact on savings behavior. Hypotheses were composed for example that emergency fund depends on education, age etc. All the hypotheses were rejected because at least on of the variables wasn’t statistically significant. But all the models had very interesting results and a lot of variables to describe as factors of youth financial literacy. For sure it wasn’t the objective to test dozens of hypotheses with only two variables.


  Based on the survey the data concludes that the percentage of young people who are interested in managing their finances or saving for retirement is farely low. The topic is crucial and there will be suggestions to change the situation. It is good to see that young people don’t have so unhealthy lifestyles.


  Most of the models had very similar results which is great news for making conclusions and suggestions. Not smoking,  not taking loans, increase in salary, getting older and starting saving for pensions have positiive effects on emergency fund and monthly savings rate. Being healthy and making rational financial decisions will have a great impact on our personal lives. These young people who already save for retirement have in common that they have studied economics in high school, they keep monthly budgets and they don’t gamble. As keeping a monthly budget seems reasonable to reach financial targets for retirement or short term goals we studied a specific model to analyse different impacts. Analysis showde that young people who keep budgets their parents are doing the same, they are more likely men, they also already save for short or long term purposes.


  After making conlusions there are some suggestions to consider. Economics classes should be concluded in at least elementary school curriculum, because we see that this is the first step to financial literacy and very important is to make sure that people who will have lower education get a chance to study basics of finance. The time before becoming an adult is hard for parents, they are preparing their kids for adulthood. Study found that to discipline kids and being an example for them has positive impact on their saving habits. Healthy lifestyle is a way to go, if Estonians want to see growth within themselves and for the country perspective too. Government should focus on limiting unhealthy habits and guide people to knowledge. Ageing people in Estonia, emigration and negative growth population will be a tough issue to deal with, especially young peoples wishes to stop working before retirement age.


Keywords: saving, budget, retirement, future, financial literacy, Estonian youth

I am very glad to see that results have been mentioned in different newspapers:

  • Postimees, (one of the news market leader in Estonia)


1006 people took part in the survey. Thank you!

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