What should I reserve “emergency savings” for?
Emergency funds are good to keep yourself out of debt, for whatever reason. Job loss is a big place where an emergency fund can help you out.  It buys you time to find another job before hauling out the credit cards for your groceries, falling behind on your mortgage and car payments, etc. But it can just as easily be used for major car repairs, serious medical issues, home repairs, etc. ... anything that needs to be done quickly, and isn't a discretionary item. The bigger your cash reserves, the better, especially now that the economy is bad. "I think it is stated perfectly in the question, ""unforeseen critical needs."" You know you will need to buy new tires for your car, they are critical but not unforeseen. However, if a tree falls on your car and you need to pay the insurance deductible for the repairs it would be unforeseen. You should budget for the expenses you can plan for in advance like car maintenance and repairs. An emergency fund is for items that are out of the ordinary."
If I were in your shoes (I would be extremely happy), here's what I would do: Get on a detailed budget, if you aren't doing one already. (I read the comments and you seemed unsure about certain things.)  Once you know where your money is going, you can do a much better job of saving it. Retirement Savings: Contribute up to the employer match on the 401(k)s, if it's greater than the 5% you are already contributing. Open a Roth IRA account for each of you and make the max contribution (around $5k each).  I would also suggest finding a financial adviser (w/ the heart of a teacher) to recommend/direct your mutual fund investing in those Roth IRAs and in your regular mutual fund investments. Emergency Fund With the $85k savings, take it down to a six month emergency fund.  To calculate your emergency fund, look at what your necessary expenses are for a month, then multiply it by six.  You could place that six month emergency fund in ING Direct as littleadv suggested.  That's where we have our emergency funds and long term savings.  This is a bare-minimum type budget, and is based on something like losing your job - in which case, you don't need to go to starbucks 5 times a week (I don't know if you do or not, but that is an easy example for me to use).  You should have something left over, unless your basic expenses are above $7083/mo. Non-retirement Investing: Whatever is left over from the $85k, start investing with it. (I suggest you look into mutual funds) it.  Some may say buy stocks, but individual stocks are very risky and you could lose your shirt if you don't know what you're doing.  Mutual funds typically are comprised of many stocks, and you earn based on their collective performance. You have done very well, and I'm very excited for you. Child's College Savings: If you guys decide to expand your family with a child, you'll want to fund what's typically called a 529 plan to fund his or her college education.  The money grows tax free and is only taxed when used for non-education expenses.  You would fund this for the max contribution each year as well (currently $2k; but that could change depending on how the Bush Tax cuts are handled at the end of this year). Other resources to check out: The Total Money Makeover by Dave Ramsey and the Dave Ramsey Show podcast. You should invest in that with the best possible outcome.  Right now that is in yourself.  Your greatest wealth building tool, at this point, is your future income.  As such anything you can do to increase your earnings potential.  For some that might mean getting an engineering degree, for others it might mean starting a small business.  For some it is both obtaining a college degree and learning about business. A secondary thing to learn about would be personal finance. I would hold off on stocks, at this time, until you get your first real job and you have an emergency fund in place. Penny stocks are worthless, forget about them. Bonds have their place, but not at this point in your life.   Saving up for college and obtaining a quality education, debt free, should be your top priority. Saving up for emergencies is a secondary priority, but only after you have more than enough money to fund your college education. You can start thinking about retirement, but you need a career to help fund your savings plan.  Put that off until you have such a career. Investing in stocks, at this juncture, is a bit foolish.  Start a career first.  Any job you take now should be seen as a step towards a larger goal and should not define who you are. Congrats on making it this far debt free. It is rare, but nice to be in the situation that you are in.  The important thing here is that you want to remain debt free. That's really what the emergency fund is all about: it keeps you from needing to go into debt should something unexpected happen.  You've got 1.5 months worth of expenses saved up, and that's great. If you don't have a family or other responsibilities, that might be enough, but think about this: how are you paying for school, and what would happen if those funds stopped coming in? If you are paying for school out of your own income, what happens if you lose your job? If someone else, perhaps your parents, is paying for school, what happens if they are suddenly no longer able to do so?  While you have extra cash, you want to be saving it up for situations like this.  If I were you, I would build up that emergency fund until it got to the point where it could pay all your expenses and tuition until graduation. Hopefully, you won't need to touch it, but it will be there if you need it.  Since you need to be able to access your money quickly, it is generally recommended to park this money in a savings account, where it is very safe. Mutual funds are a great way to invest, but they are not safe in the short term.  Don't stress out about not being able to start retirement investing just yet. Making sure you can finish school debt free is the best investment you can make right now. After you graduate and land a job, you can start investing aggressively. Thanks for your service.   I would avoid personal investment opportunities at this point.  Reason being that you can't personally oversee them if you are deployed overseas.  This would rule out rentals and small businesses.  Revisit those possibilities if you get married or leave the service.   If you have a definite time when you would like to purchase a car, you could buy a six or twelve month CD with the funds that you need for that.  That will slightly bump up your returns without taking much risk.  If you don't really need to buy the car, you could invest that money in stocks.  Then if the stock market tanks, you wait until it recovers (note that that can be five to ten years) or until you build up your savings again.  That increases your reward at a significant increase in your risk.  The risk being that you might not be able to buy a car for several more years.   Build an emergency fund.  I would recommend six months of income.  Reason being that your current circumstances are likely to change in an emergency.  If you leave the service, your expenses increase a lot.  If nothing else, the army stops providing room for you.  That takes your expenses from trivial to a third of your income.  So basing your emergency fund on expenses is likely to leave you short of what you need if your emergency leaves you out of the service.   Army pay seems like a lot because room (and board when deployed) are provided.  Without that, it's actually not that much.  It's your low expenses that make you feel flush, not your income.  If you made the same pay in civilian life, you'd likely feel rather poor.   $30,000 sounds like a lot of money, but it really isn't.  The median household income is a little over $50,000, so the median emergency fund should be something like $25,000 on the income standard.  On the expenses standard, the emergency fund should be at least $15,000.  The $15,000 remainder would buy a cheap new car or a good used car.  The $5000 remainder from the income standard would give you a decent used car.   I wouldn't recommend taking out a loan because you don't want to get stuck paying a loan on a car you can't drive because you deployed.  Note that if you are out of contact, in the hospital, or captured, you may not be able to respond if there is a problem with the car or the loan.  If you pay cash, you can leave the car with family and let them take care of things in case of a deployment.   If you invested in a Roth IRA in January of 2016, you could have invested in either 2015 or 2016.  If 2015, you can invest again for 2016.  If not, you can invest for 2017 in three months.  You may already know all that, but it seemed worth making explicit.   The Thrift Savings Plan (TSP) allows you to invest up to $18,000 a year.  If you're investing less than that, you could simply boost it to the limit.  You apparently have an extra $10,000 that you could contribute.  A 60% or 70% contribution is quite possible while in the army.  If you max out your retirement savings now, it will give you more options when you leave the service.  Or even if you just move out of base housing.   If your TSP is maxed out, I would suggest automatically investing a portion of your income in a regular taxable mutual fund account.  Most other investment opportunities require help to make work automatically.  You essentially have to turn the money over to some individual you trust.  Securities can be automated so that your investment grows automatically even when you are out of touch. "There are no risk-free high-liquidity instruments that pay a significant amount of interest.  There are some money-market accounts around that pay 1%-2%, but they often have minimum balance or transaction limits.   Even if you could get 3%, on a $4K balance that would be $120 per year, or $10 per month.  You can do much better than that by just going to $tarbucks two less times per month (or whatever you can cut from your expenses) and putting that into the savings account. Or work a few extra hours and increase your income. I appreciate the desire to ""maximize"" the return on your money, but in reality increasing income and reducing expenses have a much greater impact until you build up significant savings and are able to absorb more risk.  Emergency funds should be highly liquid and risk-free, so traditional investments aren't appropriate vehicles for them." Thanks for your service.   I would avoid personal investment opportunities at this point.  Reason being that you can't personally oversee them if you are deployed overseas.  This would rule out rentals and small businesses.  Revisit those possibilities if you get married or leave the service.   If you have a definite time when you would like to purchase a car, you could buy a six or twelve month CD with the funds that you need for that.  That will slightly bump up your returns without taking much risk.  If you don't really need to buy the car, you could invest that money in stocks.  Then if the stock market tanks, you wait until it recovers (note that that can be five to ten years) or until you build up your savings again.  That increases your reward at a significant increase in your risk.  The risk being that you might not be able to buy a car for several more years.   Build an emergency fund.  I would recommend six months of income.  Reason being that your current circumstances are likely to change in an emergency.  If you leave the service, your expenses increase a lot.  If nothing else, the army stops providing room for you.  That takes your expenses from trivial to a third of your income.  So basing your emergency fund on expenses is likely to leave you short of what you need if your emergency leaves you out of the service.   Army pay seems like a lot because room (and board when deployed) are provided.  Without that, it's actually not that much.  It's your low expenses that make you feel flush, not your income.  If you made the same pay in civilian life, you'd likely feel rather poor.   $30,000 sounds like a lot of money, but it really isn't.  The median household income is a little over $50,000, so the median emergency fund should be something like $25,000 on the income standard.  On the expenses standard, the emergency fund should be at least $15,000.  The $15,000 remainder would buy a cheap new car or a good used car.  The $5000 remainder from the income standard would give you a decent used car.   I wouldn't recommend taking out a loan because you don't want to get stuck paying a loan on a car you can't drive because you deployed.  Note that if you are out of contact, in the hospital, or captured, you may not be able to respond if there is a problem with the car or the loan.  If you pay cash, you can leave the car with family and let them take care of things in case of a deployment.   If you invested in a Roth IRA in January of 2016, you could have invested in either 2015 or 2016.  If 2015, you can invest again for 2016.  If not, you can invest for 2017 in three months.  You may already know all that, but it seemed worth making explicit.   The Thrift Savings Plan (TSP) allows you to invest up to $18,000 a year.  If you're investing less than that, you could simply boost it to the limit.  You apparently have an extra $10,000 that you could contribute.  A 60% or 70% contribution is quite possible while in the army.  If you max out your retirement savings now, it will give you more options when you leave the service.  Or even if you just move out of base housing.   If your TSP is maxed out, I would suggest automatically investing a portion of your income in a regular taxable mutual fund account.  Most other investment opportunities require help to make work automatically.  You essentially have to turn the money over to some individual you trust.  Securities can be automated so that your investment grows automatically even when you are out of touch. "So long as you have complete, virtually instant access to funds through checks, debit card, or ATM transaction, then yes it would be a better option than a ""vanilla"" savings account.   If it's in a brokerage account that you would need to process a transfer and potentially wait a few days for everything to settle, then I would just keep it in savings. The amount earned in interest isn't worth the extra hassle.  A compromise might be to keep a few thousand in a savings account and the rest in a money market.  That way you earn some interest and still have instant access to enough funds to cover most emergencies." If this is truly your emergency fund, then you should keep the money safe. Unfortunately interest rates are very low right now and there is not much you can do about that. However, ask your investment advisor for a CDIC insured high interest account, such as these: