Money that you contribute to a ROTH, can be withdrawn at any time, without penalty. It is the earnings that it makes, that can not be withdrawn without taxes or penalty. My caveat is that these are current rules, and can change at some point. The ROTH rules can be pretty complex.
I actually keep some emergency savings in my own ROTH. The kind I doubt I would ever touch, but is still accessible "just in case." I have invested it in CDs, money market accounts, and MM Mutual Funds (all cash accounts, to preserve the principal). There is a big myth out there that you can only invest IRAs in stocks and bonds.
My caveats are that you need to understand the ROTH rules and keep on top of changing tax laws. I only recommend this strategy if you already are putting enough away for retirement. Or if you are just starting out and want a little more of an emergency cushion.
Your friend is right, overall.
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