An emergency fund is an amount of money set aside to cover the financial surprises life throws your ways (it`s your “just in case” account). These unplanned events that life throws can be costly and stressful. Just like individuals have emergency accounts, for unforeseen circumstances, farmers do also need to have their own emergency fund account. Emergency funds should be held in a liquid account so that it can be accessed quickly.
It is of utmost importance, during such time of climate change uncertainty for farmers to have an emergency fund account. This account should be separated from other savings or investment accounts and should not be withdrawn, otherwise it should be replenished if it have been withdrawn. The purpose of the account is to serve farmers in regard with future unforeseen events. It is earmarked for spending on urgent, unplanned situations only. It`s intended to be used only for worst –case-scenarios. This might be for instance a natural disaster that might occur, such as flood, drought, cyclones etc. At times, wildfires do also starts on farms causing damage to useful equipment’s and properties. All of these events are unforeseen and most of the time, take on farmers during times when they least expect them to occur.
In the area of farming, most finance experts recommend saving an emergency fund that`s large enough to cover 6 to 12 months of expenses. That will help, because of the field/industry which is being dealt and also the tension of climate change. Saving money is not always easy, but it`s likely to be less painful than the alternatives, especially for farmers. As a result, having an emergency fund helps farmers to calm down and keep their stress level down in times of emergency like the current drought that we are experiencing in Namibia. An emergency fund also helps to avoid the farmers to experience unnecessary loss; such as livestock’s, equipment, properties and other items.
As farmers continue to face incredible threats to their survival, it`s important to always plan ahead of future unforeseen circumstances by creating an emergency fund. The greatest benefit of an emergency fund is the safety net it offers in times of an emergency.