Are Treasury Bills Safe? Why They're a Good Bet
A Treasury bill, or T-bill, is backed by the U.S. Treasury Department and one of the safest places to save your cash.
Savings rates have continued to stay high this year as the Federal Reserve has held back on cutting rates, so if you’ve been looking for a place to store your savings and earn interest in the short-term, you’ve probably considered a high-yield savings account or 1-year CD. And while these are both good options, there’s another short-term investment alternative you should also consider: Treasury bills.
Treasury bills (T-bills) have maturity dates of less than a year, and while generally, longer-term Treasuries pay higher yields, short-term Treasury yields are currently higher. Right now, the 3-month Treasury bill rate is 5.25% while the 30-year Treasury rate is 4.58%.
So, if you're looking for a risk-free way to earn interest on your cash over a short period of time, investing in a T-bill could be a good choice.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
When are Treasury bills a good investment?
Treasury bills are good investments for individuals looking to make a large purchase in a short timeline, as the money will only be tied-up for at most a year. Although T-bills don’t typically earn as much as other securities, or in some cases CDs, they still offer higher returns than traditional savings accounts.
Plus, they’re one of the safest places you can save your money, making them a great fit for conservative investors who want to avoid risk-taking but still want to earn interest.
How to buy a Treasury bill
You can either buy a Treasury directly from the government through TreasuryDirect.gov or through a broker, and the minimum purchase is $100.
To start an account with TreasuryDirect, you'll need to provide a U.S. address, Social Security number and a bank account. Afterwards, since T-bills are sold on auction, those looking to invest will need to place a bid. Once it’s accepted, it will arrive in your TreasuryDirect account.
If you use a brokerage account, T-bills can also be bought through ETFs and mutual funds. If you’re looking to buy a T-bill for your IRA, you’ll need to go through a broker as you can not do so on TreasuryDirect.
How a Treasury bill works
A Treasury bill, or T-bill, is a short-term debt obligation backed by the U.S. Treasury Department. It's one of the safest places you can save your cash, as it's backed by the full faith and credit of the government.
T-bills are auctioned off at a discount and then redeemed at maturity for the full amount. "Interest" on T-bills is the difference between how much you pay and how much value you get when the bill matures. The most common maturity dates for T-Bills are four, eight, 13, 26 and 52 weeks.
In addition to Treasury bills, there are other Treasury securities to invest in as well. Treasury bonds, vs Treasury bills, pay a fixed interest rate every six months and have the longest maturity periods, either 20 or 30 years. Treasury notes also pay a fixed rate of interest every six months but have shorter maturity periods than T-bonds, ranging from two to 10 years.
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Erin pairs personal experience with research and is passionate about sharing personal finance advice with others. Previously, she was a freelancer focusing on the credit card side of finance, but has branched out since then to cover other aspects of personal finance. Erin is well-versed in traditional media with reporting, interviewing and research, as well as using graphic design and video and audio storytelling to share with her readers.
-
Confused by Annuities? Making Sense of the Different Types
Many investors aren't sure if annuities are a good option for meeting financial goals. Let's look at the different categories, along with their pros and cons.
By Kris Maksimovich, AIF®, CRPC®, CPFA®, CRC® Published
-
Talkin' 'Bout My Generational Wealth: Baby Boomers
With retirement, each generation has different priorities and challenges. For Baby Boomers, it's a matter of ready or not, here it comes.
By Alvina Lo Published
-
Tech Outage: How to Get Reimbursed if Your Flight Was Canceled or Delayed
Did the global Microsoft outage disrupt your travel plans? Here's how to get reimbursed if your flight was canceled or delayed.
By Erin Bendig Last updated
-
How the Tech Outage Impacted Banks and Finances
A major tech outage that caused chaos at airports also impacted banking and finance.
By Alexandra Svokos Last updated
-
Get Your Starbucks $3 Drink Today
Starbucks $3 Drink specials are available this Friday only, July 19, from 12 to 6 p.m.
By Kathryn Pomroy Published
-
After Amazon Prime Day: The 25 Best Deals Still Going On
If you missed out on Amazon Prime Day, no worries. There are dozens of "too-good-to-miss" Post-Prime Day deals to cash in on, from Moen, Keurig, Apple, Ninja, Levis and more.
By Kathryn Pomroy Published
-
Amazon Prime Day Southwest Deal: 30% Off Domestic Flights
Amazon Prime Day Southwest Deal: 30% Off Domestic Flights
By Kathryn Pomroy Published
-
Amazon Prime Day: Best Deals Under $50
Get the best Amazon Prime Day deals under $50 before they sell out.
By Donna LeValley Published
-
Save Money on Your Energy Bills with These Amazon Prime Day Deals
Amazon Prime Day is prime time to get great deals on energy efficient devices and appliances.
By Donna LeValley Published
-
Amazon Prime Day Savings: The 20 Best Items to Splurge On
Score exclusive Amazon Prime Day savings on those big-ticket items you've been dreaming of.
By Erin Bendig Published