Why Treasury Bills are a Good Bet

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. 

Among bills auctioned on a regular schedule, there are six maturity terms: four weeks, eight weeks, 13 weeks, 17 weeks, 26 weeks and 52 weeks, according to Treasury Direct. You’ll receive an interest payment once your bill matures. Lately, Treasury bill yields have been hovering around 5%.

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.

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. As mentioned above, 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. Compare Treasury bills vs Treasury bonds, which 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.