Aug 4, 2024
Climate change is wreaking havoc on the planet, from droughts and floods to heatwaves and hurricanes. While there’s a cost to the planet, there’s also a cost to our pocketbooks.
Damage related to climate change is costing the world $16 million every hour, according to the World Economic Forum. That adds up to between $1.7 to $3.1 trillion per year by 2050. But the costs are already adding up in the U.S., totaling more than $176 billion in 2022 alone, according to a report by the U.S. Department of the Treasury.
Advertisement
So what will that look like for the average American? A new study ran the numbers: A baby born in 2024 can expect to pay around $500,000 in climate change costs over their lifetime, according to the report produced by climate change consultancy ICF.
But, as the report points out, this only takes into account certain components of net income and cost of living, so this is an underestimate, and the actual costs could reach around $1 million per person.
“Despite the large uncertainties associated with estimating the impacts of future climate change on personal finances, one thing is clear: climate change will have a significant impact on Americans’ standard of living,” says the report.
How climate change will impact household finances
In what ICF considers a “high climate change scenario,” there are three main ways climate change will impact household finances, when compared to a hypothetical world where there is no climate change: retirement income losses (an average $400,000 cumulative decrease over 80 years), tax increases (an average $200,000 increase) and employment income losses (an average $25,000 decrease).
Another report, this one by researchers at the European Central Bank and Potsdam Institute for Climate Impact, found that global warming isn’t just raising temperatures: it’s expected to raise global inflation by an average of 0.3 to 1.2 percentage points per year by 2035.
The effects of “climateflation” mean Americans born in 2024 will be paying 9% more for housing, food and daily expenses over the course of their lifetime, while decreasing their net income by about 10%, according to the ICF report.
Over the coming decades, costs related to housing — which is already high — will continue to increase with higher incidents of weather-related damage, such as flooding. In turn, that could increase insurance premiums, reduce coverages or even make certain households ineligible for insurance. Those who live in an area prone to natural disasters could also experience a decrease in their property value, further diminishing the value of their assets.
The cost of food will also rise — not just because of inflation, but because of disruptions to agriculture and supply chains. For example, severe weather could wipe out certain crops, triggering a spike in prices. By 2064, when an individual born in 2024 turns 40, annual estimated spending on food will be $4,900, according to ICF.
Advertisement
Individuals will also pay more for health care, transportation and energy costs. But they will likely see less money on their paycheck. When it comes to employment income, higher taxes could take a bigger bite out of their salary, thanks to an increase in government expenses (like repairing damaged public infrastructure) and a decrease in government revenue.
Must Read
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Robert Kiyosaki begs investors not to miss this ‘explosion’ — says this 1 asset will surge 400% in a year
- Vanguard reveals what could be coming for U.S. stocks, and it’s raising alarm bells for retirees. Here’s why and how to protect yourself
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
How can Americans prepare for this future?
With those costs in mind, parents may wonder if it’ll be more important for their kids to have a fully-funded disaster relief account than a college fund stashed away in a 529.
If researchers’ projections are correct, the future will prove to be costly for people of all ages. However, there are a few steps you can take to protect against future climate change-related financial losses.
“Households should look for opportunities to lower financial burdens caused by climate hazards by adapting their financial management strategies and assets (including homes and other property) for climate change,” according to the Treasury report. That might mean taking advantage of government incentives for climate-resilient property modifications and energy-efficient home improvements.
It might also mean adapting your finances, from reviewing your insurance policies to boosting your emergency savings — possibly even opening an account for disaster-related emergencies (for you or your children). Make sure those emergency funds are easily accessible — you probably won’t have much warning if a storm is coming your way.
But it’s also a good time to take action. The ICF report also posits a low-emissions scenario, in which Americans shift to more sustainable practices and lower their carbon emissions. Under this scenario, taxes for a baby born in 2024 would only increase by $5,200 over a lifetime, compared to $200,000, and they’d earn an extra $25,000 in investment income versus a $400,000 loss.
And so it seems doing good for the environment may also do good for your pocketbook.
You May Also Like
- Turning 50 with $0 saved for retirement? Most people don’t realize they’re actually just entering their prime earning decade. Here are 6 ways to catch up fast
- This 20-year-old lotto winner refused $1M in cash and chose $1,000/week for life. Now she’s getting slammed for it. Which option would you pick?
- Warren Buffett used these 8 repeatable money rules to turn $9,800 into a $150B fortune. Start using them today to get rich (and stay rich)
- Here are 5 easy ways to own multiple properties like Bezos and Beyoncé. You can start with $10 (and no, you don’t have to manage a single thing)
Vawn Himmelsbach is a veteran journalist who has been covering tech, business, finance and travel for the past three decades. Her work has been featured in publications such as The Globe and Mail, Toronto Star, National Post, Metro News, Canadian Geographic, Zoomer, CAA Magazine, Travelweek, Explore Magazine, Flare and Consumer Reports, to name a few.
