Leonore Riitsalu’s doctoral thesis: Estonians are not taking sufficient advantage of their knowledge and income to secure their future

Leonore Riitsalu foto
The doctoral thesis defended at the EBS on Thursday, 9 May, reveals that Estonians fail to make full use of their knowledge and income in organising their personal finances to secure their future well-being. Instead, they tend to focus on the present and make financial decisions that are often irrational. The financial literacy level of young people can be explained through both the number of books at home and their family’s wealth.

“We know that in order to secure future well-being, we have to organise our personal and family finances rationally in each stage of life: we need to make a budget and carefully consider both our short- and long-term wishes and needs and make smart decisions in order to fulfil them. In reality, we tend to favour current well-being over working towards future goals and live from payday to payday,” said Leonore Riitsalu, a newly qualified Doctor of the Estonian Business School, when summarising the key findings of her Doctoral thesis Books and Biases – the Explanation for Bounded Rationality in Managing Personal Finances.

Riitsalu added that such behaviour is financially damaging to people in our current environment of an ageing population, changed pension systems and complicated financial services. “In more than 50 countries, policy-makers have adopted a national financial education strategy that aims to improve financial literacy. The implementation of the strategy is based on the presumption that good knowledge and a satisfactory income are sufficient for making smart financial decisions. Unfortunately, studies indicate the opposite – knowledge does not always lead to smart financial behaviour and despite high income, many people do not make investments in long-term goals,” Riitsalu explained.


On 9 May, Leonore Riitsalu defended her Doctoral thesis Books and Biases – the Explanation for Bounded Rationality in Managing Personal Finances at the Estonian Business School. The supervisor of the thesis was Professor Katri Kerem from the Estonian Business School and the opponents were Professor Liga Peiseniece from the BA School of Business and Finance in Latvia and Professor Emeritus Fred van Raaij from Tilburg University in the Netherlands.
Key findings of Riitsalu’s Doctoral thesis:

  • Estonians fail to make full use of their financial knowledge and income to secure their future well-being. 
  • The high financial literacy level among Estonian students in the PISA test is influenced by the number of books at home rather than the wealth of parents.
  • The great difference in the financial literacy scores of students of Estonian-language and Russian-language schools is only explained by the number of books at home.
  • Only 9% of the respondents selected their mandatory pension fund consciously; better financial knowledge does not explain deliberate choices and people’s decisions are often influenced by recommendations made by acquaintances or salespeople.

The doctoral thesis can be found here

Leonore Riitsalu studies financial literacy and behavioural economics. Prior to starting her research, she led cooperation projects on financial literacy at the Estonian Financial Supervision Authority and represented Estonia in the OECD International Network on Financial Education. Since 2014, she has been a visiting lecturer at the EBS and the University of Tartu. She is also the co-founder of MTÜ Rahatarkus. As a consultant, her clients include the Foresight Centre, OECD and the Central Bank of Saudi Arabia.