Common wisdom in the personal finance world is to have at least 3/4/5/6/9/12 months of expenses in an emergency fund.
The money in this fund is used as a cash buffer, not to be invested but to be ready when something bad happens to you.
In general, this is really good advice. But for the die-hard FIRE people, do you really need an emergency fund?
Having a large sum of cash can certainly help you out when you’re in need. But it also has some negative implications. Cash drag is one example.
In this post I dive deeper into the topic of emergency funds.