When you have money that you may need within a few months or a few years, leaving it in cash is not the only option. Treasury bills, commonly called T-bills, are short-term U.S. government securities that investors can use to earn a return while keeping their investment focused on a relatively short time period.
Treasury bills are different from stocks, mutual funds, and many other investments because they have short maturities and are issued by the U.S. Department of the Treasury. Understanding how T-bills work, how investors earn money from them, and what risks they carry can help you decide whether they fit into your short-term savings or investment strategy.
What Are Treasury Bills?
Treasury bills are short-term debt securities issued by the U.S. government.
When you buy a Treasury bill, you are effectively lending money to the U.S. government for a specific period. In exchange, you receive the face value of the security when it matures.
T-bills are commonly issued with short-term maturities, including periods such as four weeks, eight weeks, 13 weeks, 17 weeks, 26 weeks, and 52 weeks.
Unlike some bonds that pay periodic interest payments, Treasury bills are generally sold at a discount to their face value.
For example, you might purchase a T-bill for less than $1,000 and receive $1,000 when it matures. The difference between the purchase price and the amount you receive at maturity represents your return, before considering taxes and other factors.
How Do Treasury Bills Work?
The basic process is relatively straightforward.
Suppose a Treasury bill has a face value of $1,000 but is purchased for $975. If you hold it until maturity and receive the full $1,000, your return would be $25.
The actual purchase price and yield depend on the auction and market conditions.
Treasury bills can be purchased through TreasuryDirect or through a brokerage account. Investors can generally choose from available maturities based on how long they are comfortable keeping their money invested.
Once the T-bill reaches maturity, the government pays the face value.
You can then use the proceeds for another financial goal or reinvest them into another Treasury security.
How Do You Make Money With Treasury Bills?
Treasury bills generally do not work like traditional savings accounts where interest is deposited into your account on a regular schedule.
Instead, T-bills are commonly issued at a discount.
Imagine a hypothetical $10,000 Treasury bill that costs $9,850 and pays $10,000 at maturity. The $150 difference represents the investor’s return before taxes and other considerations.
The actual price will depend on the bill’s auction price and prevailing market conditions.
Treasury bills can also be bought and sold before maturity in the secondary market. If you sell before maturity, however, the price may be higher or lower than what you originally paid.
Holding the T-bill until maturity provides a clearer outcome because you receive its face value at maturity, assuming the government fulfills its obligation.
What Are the Main Treasury Bill Maturities?
Treasury bills are designed for short-term investing, and different maturities can be useful for different cash-flow needs.
Common maturities include:
- Four weeks
- Eight weeks
- 13 weeks
- 17 weeks
- 26 weeks
- 52 weeks
A shorter maturity may be useful when you expect to need your money relatively soon.
A longer maturity can lock in the investment for a greater period, although the opportunity cost can be different if interest rates change during that time.
The right maturity depends on when you expect to need the money and what alternatives are available.
Treasury Bills vs. Savings Accounts
Treasury bills and savings accounts serve different purposes.
A savings account generally provides easier access to your money. This can make it useful for emergency savings and everyday financial needs.
A Treasury bill, by comparison, has a specific maturity date. While it can generally be sold before maturity through the secondary market when held through a brokerage, its market price can fluctuate.
If the money is intended for an emergency, accessibility may be more important than earning a potentially higher return.
Our recent guide on an emergency savings account and where to keep it explains why emergency money generally needs to balance safety, liquidity, and interest-earning potential.
For money that you do not expect to need immediately, Treasury bills may be one option worth comparing with savings products.
Treasury Bills vs. Certificates of Deposit
Treasury bills and certificates of deposit also have some similarities.
Both can be used for relatively short-term savings or investment goals, and both can provide more predictable returns than investments such as individual stocks.
However, CDs are offered by banks and credit unions, while Treasury bills are issued by the U.S. government.
CDs generally have specific terms and may impose an early-withdrawal penalty if you take your money out before maturity.
Treasury bills have a different structure. If you hold a T-bill until maturity, you receive its face value. If you need to sell before maturity through the secondary market, the market price may differ from your original purchase price.
This makes it important to compare liquidity, maturity dates, rates, and account terms rather than assuming one product is automatically better for every goal.
Why Do Interest Rates Matter for Treasury Bills?
Treasury bill yields can change as market conditions change.
When short-term interest rates rise, newly issued Treasury bills may offer higher yields. When rates decline, newly issued T-bills may offer lower yields.
This means the timing of your investment can affect the return available on a new Treasury bill.
However, investors should not focus only on the current yield. The maturity date, intended use of the money, taxes, and liquidity needs also matter.
For a broader look at how interest-rate changes can affect savings and other financial products, see How Will Higher Interest Rates Affect Your Money in 2026?.
Are Treasury Bills Safe?
Treasury bills are generally considered among the lower-risk investments because they are backed by the U.S. government.
However, lower risk does not mean there are no risks.
One important consideration is interest-rate risk if you sell before maturity. The market value of a Treasury security can change when interest rates change.
There is also inflation risk. If inflation rises faster than your investment return, the purchasing power of your money may decline even if the nominal value of your investment increases.
There can also be reinvestment risk. When your T-bill matures, the yield available on a new Treasury bill may be lower than the rate you previously received.
How Are Treasury Bills Taxed?
For U.S. investors, Treasury bill interest is generally subject to federal income tax but is exempt from state and local income taxes.
Your individual tax situation can be different depending on your circumstances, so consider consulting a qualified tax professional for advice about your specific situation.
Taxes are important when comparing Treasury bills with other savings and investment products because the advertised yield does not necessarily represent the amount you keep after taxes.
Can Treasury Bills Help With Short-Term Goals?
Treasury bills can potentially be useful for money that has a defined future purpose.
For example, someone may be saving money for a planned expense several months from now and want an investment with a relatively short maturity.
You could choose a T-bill that matures around the time you expect to need the money.
This approach can provide a clear maturity date instead of exposing the money to the daily price fluctuations of stocks.
However, the investment should match the timing of the goal. If you may need the money unexpectedly, an accessible savings account may be more appropriate.
What Is a Treasury Bill Ladder?
A Treasury bill ladder works similarly to a CD ladder.
Instead of putting all your money into one maturity, you divide it across multiple T-bills with different maturity dates.
For example, you might invest portions of your money into four-week, eight-week, 13-week, and 26-week Treasury bills.
As each bill matures, you can use the proceeds or reinvest them into another Treasury bill.
This can create multiple maturity dates and reduce the need to make one large investment decision at a single point in time.
A ladder can also give you repeated opportunities to invest at the yields available in the market.
However, future Treasury yields are not guaranteed, so the return on reinvested money may be higher or lower than your original investment.
What Should You Consider Before Buying Treasury Bills?
Before investing, consider several factors.
Your Time Horizon
Choose a maturity that fits when you expect to need the money.
Liquidity
Determine whether you can leave the money invested until maturity or whether you might need to sell earlier.
Yield
Compare the available Treasury bill yield with other short-term options after considering taxes and fees.
Taxes
Understand the federal and state tax treatment that applies to your situation.
Inflation
Consider whether your expected return is likely to preserve purchasing power over your investment period.
Reinvestment
Think about what you will do when the T-bill matures and whether you are comfortable with potentially different future yields.
Treasury Bills and Compound Growth
Treasury bills can also be part of a broader strategy for earning returns on money that would otherwise remain idle.
If you repeatedly reinvest your returns, your overall savings can benefit from the general concept of compounding over multiple investment periods.
Our recent guide on how compound interest can grow your savings explains how returns can build on previous earnings over time.
Treasury bills themselves do not work exactly like a savings account that compounds interest in the traditional sense. The important point is that repeatedly reinvesting maturing investments can allow your money to continue generating returns.
Final Thoughts
Treasury bills are short-term U.S. government securities that can provide investors with a structured way to invest money for periods ranging from several weeks to about a year.
They are generally considered relatively low-risk investments, but they still have considerations such as interest-rate changes, inflation, taxes, liquidity, and reinvestment risk.
T-bills may be useful for investors who have a specific short-term goal and do not need immediate access to the money. Savings accounts may be more appropriate for emergency funds because they generally provide easier access.
Before investing, compare the maturity date, yield, tax treatment, and liquidity with other short-term options. Matching the investment to the purpose and timing of your money is often more important than simply choosing the product with the highest advertised yield.
