In most countries holding cache is a net loss due to low interest rates so that's not necessarily a good argument.
This is money for when you lose your job for instance
Your appetite for risks and circumstances determine how big it should be (a good rule of thumb is six months worth of salary) but there are countless stories of people trying to be clever with their emergency funds and storing them in ETFs or riskier investments only to find that when the need comes, their fund is not enough and get in financial distress.
https://www.treasurydirect.gov/indiv/research/indepth/ibonds...
These people struggle to pay rent each month let alone think about "investments".
Sure you will lose a little bit, like 2 or 3% a year. But if you have nothing saved then what will you do in case of an emergency? such as losing a job?