Climate change has been burning through the economy, damaging homes and businesses and eating away at household budgets.
Between 2018 and 2022, the cost of weather and climate disasters surpassed $617 billion — a record high for any five-year increment, according to a Treasury report released Sept. 29. The report focuses on the impacts of climate change, from more frequent severe weather events to rising temperatures, on American household finances.
The cost of such disasters totaled over $176 billion in 2022 alone, and 13% of Americans reported economic hardship due to severe weather events and disasters within the past year.
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It’s not just the physical damage caused by bad weather. Conditions such as elevated temperatures can also impact productivity, adding strain to both workplaces and households.
“We’ve known for a very long time that human beings are very sensitive to temperature and that their performance declines dramatically when exposed to heat, but what we haven’t known until very recently is whether and how those lab responses meaningfully extrapolate to the real-world economy,” R. Jisung Park, an environmental and labor economist at the University of Pennsylvania, told The New York Times earlier this year.
“And what we are learning is that hotter temperatures appear to muck up the gears of the economy in many more ways than we would have expected.”
Climate change is impacting household finances
Weather and climate disasters like wildfires and floods can wreak destruction on buildings, roads and infrastructure — and impact your place of work.
Heat waves in particular can create unsafe working conditions for outdoor workers, such as those in construction or agriculture. But extreme heat can also affect workers in other workplace settings with limited relief options, such as restaurants, warehouses and delivery vehicles.
These workers often belong to low- and middle-income groups, and the Treasury has concerns they may contend with “compounding hardship” even from short-term disruptions to their earnings due to heat conditions.
On top of reduced working hours and lowered productivity, warmer temperatures can lead to workplace-related illnesses, increasing medical costs.
There are other climate-related problems that can affect everyday costs as well. For example, extreme weather events such as hurricanes can impede oil supplies and cost motorists more at the pump, damage roads and transportation infrastructure and restrict access to public transportation.
Climate change can even cut into your grocery budget, with supply chain disruptions potentially increasing prices on certain products or causing delays and shortages at stores. And you might see your energy bill go up, with heat waves leading households to use air conditioning more often.
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Natural disasters can damage housing
Depending on where you live, your home could be more at risk of weather and climate disasters that can damage or destroy property, thereby reducing home values. Some folks are able to face displacement and contend with relocation expenses, while others may be forced to deal with major repair costs.
The Treasury report cites a study that found, in 2021, climate hazards affected 1 in 10 American homes, resulting in roughly $56.92 billion in property damage among impacted households.
While repair costs can eat up your budget, delayed and incomplete repairs can lead to more lasting problems that come with more costs over time. The damage can also significantly shrink the value of your property — a major issue considering Americans have long built wealth through home equity.
Some home insurance providers have responded by raising costs or reducing coverage, while others have even fled disaster-prone states such as Florida and California altogether.
What Americans can to do to prepare
If folks face disruptions to their income due to weather conditions, they may be less able to cover climate-related expenses as well.
“The impacts of climate change are projected to worsen in coming years, putting additional communities and households at risk of financial strain,” says the department in the report.
Nearly 4 in 10 Americans say they don’t have the funds to cover a $400 emergency expense, according to the Federal Reserve Board. However, it’s crucial that people put away some cash into an emergency fund if they’re able in order to manage these costs.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.