This seems like a rhetorical question since the answer seems obvious enough. It is so obvious that I do not recall having a blog post dedicated to the topic.
So, when I came across a blogger who thinks that an emergency fund is not important to him, it got my attention. This is a contrarian and I always like to find out why contrarians think the way they do.
In summary, the reasons why he does not keep an emergency fund are:
1. His family has adequate insurance coverage.
2. His family's expenses are relatively low.
3. His family's investment portfolio is sizable.*
*Current value is about $150,000, generating about $10,000 of passive income annually. This is taken from the regular updates provided in his blog.
Anyway, have a read as I don't want to poison the well:
Why we don't keep an emergency fund?
An esteemed blogger, CW, had this to say:
No emergency fund? Never mind. But still have to maintain adequate level of liquidity to meet unforeseen multiple life events happening.
It is never one hole that sinks a ship. It is several holes happening one after another that sinks that ship.
The blogger, My 15 HWW, replied:
I admit my life experience is lacking compared to many qianbeis like you but I do hope that life would not be so harsh as to sink my small boat. Because it’s small, it could also be nimble and flexible enough to steer clear of impending danger (unlike Titanic)?
If several holes happen, think the emergency fund might not be enough too and one might have to liquidate other assets.
To which, AK says:
I get where you are coming from.
However, I would really encourage some kind of demarcation and even a blurry one is useful. Why?
Let us say that Mr. Market gives us that correction some of us have been waiting for, how much of your cash on hand would you put to work? Doing what you do, if we put in 100%, then, we would have no money left for emergencies.
A small craft might be nimble but try watching “The Perfect Storm” instead of “Titanic” to see the other side of the coin.
"We never want to count on the kindness of strangers in order to meet tomorrow’s obligations." Warren Buffett
A perfect storm could sink us if we did not have a meaningful emergency fund.
Update (29 May 2015):
How much should we have in our emergency fund?
Related post:
Don't think and grow rich.