re: What should these college kids do with the money in their savings/stock account?

Gotcha.

That's great they have a family buffer, but self reliance has it's own reward.

I like the idea of having 2 funds, 1 large cap & 1 mid/small cap. I know they're with Schwab, but Vanguard has excellent low-cost funds to consider. Once they reach 10k/fund, they should qualify for Vanguard's extra low cost admiral shares. That's a nice near-term incentive for them to shoot for. That would be an excellent way to start saving for mid/long term. If they're house hungry, they may want to lower their risk and keep a portion in a low return savings account.