Photo credit: www.cnbc.com
The Apple Fifth Avenue store in New York, U.S., on Monday, Feb. 24, 2025.
Even with a temporary halt on reciprocal tariffs now in place, consumers are bracing for potential price increases.
A recent survey by NerdWallet, which included over 2,000 respondents, revealed that a significant 85% of Americans are worried about the implications of these tariffs.
Primary concerns among consumers include the possibility that the new trade policies may jeopardize their ability to afford basic necessities and exacerbate fears of a recession in the U.S. economy.
Furthermore, indications of declining consumer confidence are surfacing in other reports.
According to the University of Michigan, consumer sentiment has plummeted over 30% since December, driven by ongoing anxiety surrounding trade disputes. The latest readings for April reflected an 11% decline from March, surpassing economists’ expectations for stability.
Experts agree that these concerns are justified. The Budget Lab at Yale University estimates that tariffs could impose an additional financial burden of approximately $3,800 per household annually.
Related insights for personal finance:
As retirement approaches, consider strategies to hedge against tariff-related price volatility.
Experts warn of heightened risks of stagflation and its implications for personal finances.
Should investors consider reallocating from U.S. stocks to international markets? Here’s what experts are advising.
“The majority of Americans are apprehensive about tariffs, which is affecting their spending intentions,” noted Kimberly Palmer, a personal finance expert at NerdWallet.
Over the next year, many respondents from the NerdWallet survey indicated plans to alter their spending behaviors, with a clear inclination towards boosting their savings.
Specifically, 45% of those surveyed aim to decrease spending on non-essential items, 33% plan to cut back on necessities, and 30% are focusing on increasing their emergency savings. In contrast, only 14% expect to reduce their debt payments.
This shift in consumer behavior comes at a time when individuals are already grappling with rising costs for groceries and essential goods, as outlined by Palmer.
“Tariffs are contributing to existing financial pressures, compelling consumers to confront some challenging choices,” she explained. These choices often include reducing travel and reconsidering major purchases, such as vehicles.
Establishing Emergency Savings as a Top Priority
Fresh economic challenges could lead to income being consumed by escalating prices, creating a necessity for prioritizing financial strategies, according to Stephen Kates, a certified financial planner with Bankrate.
Consumers may face difficult decisions regarding whether to save, invest, or pay off existing debts.
“If you don’t have any savings, begin with building an emergency fund,” Kates advised.
He recommends that individuals aim to save at least one month of essential expenses, although the ideal target should be three to six months of living costs.
This financial cushion can safeguard individuals from falling into debt in the event of job loss or other income disruptions, Kates added.
For those already managing debt, prioritizing emergency savings remains crucial, Kates confirmed. If given the option to choose between emergency savings and retirement contributions, he insists that the former should take precedence.
However, this focus on savings does not necessitate the abandonment of other financial goals.
Kates also introduced the “debt avalanche” technique, which encourages individuals to pay off debt with the highest interest rates first while meeting minimum payments on lower-rate debts. This method can yield immediate financial benefits and free up funds in household budgets, he explained.
Moreover, when it comes to retirement planning, ensuring that contributions are adequate to qualify for any employer-matching programs is crucial.
Source
www.cnbc.com