Climate Age

Occasionally you will see a real surprise!

On September 29^th, the U.S. Department of Treasury released a stunning new report, in concert with the National Financial Literacy and Education Commission. It says that, from now on, climate change will profoundly affect individual household income and finances. This carefully documented report turns the very idea of standard financial literacy education on its head.

Financial literacy means being able to apply money knowledge and skill to a wide range of life’s situations. This includes personal budgeting, savings, purchasing, bill paying, appropriate use of credit, managing credit scores, obtaining financing, and avoiding fraud and scams. Policy makers in government and the business sector want it for 100% of adults. Studies show, however, only 57% of all adults and 46% of young adults have a basic understanding of money management. The Milken institute, a leader on financial literacy, points out that this ignorance level drastically impedes an American economic system that mostly relies on individuals to build their own long-term financial wellbeing.

Financial literacy is serious stuff. The U.S. Congress established The Financial Literacy and Education Commission in 2003 to come up with a better national plan and charged the Secretary of the Treasury to coordinate with 20 other federal agencies and bureaus in its development.

In this new report, the Treasury Department lays out how “climate-related hazards will cause widespread physical damage and force interruptions and closures of normal operations of businesses, governments, and other critical services. As a result, households can face financial strain from lost income and higher costs or reduced access across a range of consumer goods and services.” The report “seeks to deepen our understanding of the relationship between climate hazards and household finances. Already, over half of U.S. counties – home to millions of Americans – face heightened future exposure to at least one of the three climate hazards: flooding, wildfire, or extreme heat.”

The report forecasts reduced individual earning and access to employee benefits, damage and destruction to property, increased spending on transportation, higher healthcare costs, more expensive utilities and less reliable access to credit, insurance, and payments for at least half the U.S. population.

Financial literacy tracker, the Council of Economic Education, and National Jump $tart have proposed national standards for financial literacy that include learning about income, spending, saving, investing and credit. Importantly, they include managing risk as a proposed standard. What is now described as “unexpected events” in the standards (often brought on by natural disasters) are becoming more expected and that is where climate literacy must be more effectively infused.  It will mean knowing where the high-risk regions of the nation are located and what job choices, insurance and investing choices make the most sense.

Who is at risk?  The Treasury report currently identified about one half of the 3,000 counties in the U.S. as being particularly vulnerable to fire, floods and heatwaves. This will include places along coasts, next to major forests, along major rivers, or in areas subject to extreme hot weather. Lower income households will have the most exposure to these climate-driven challenges. Changes in extreme weather and climate patterns will necessitate an education system that prepares students for financial literacy and an uncertain and rapidly shifting climate future. Add personal finance to the list of climate-related education musts!