High-Yield Savings vs. Treasury Bills: Where to Park Cash

When you have cash you might need within a year or two, the main goal is preserving value, not chasing returns. Two popular homes are high-yield savings accounts and Treasury bills.

High-yield savings accounts

Pros: instant access, FDIC insurance up to $250,000 per depositor, and rates tend to rise with the federal funds rate. Cons: the bank can change the rate at any time, and some accounts have balance limits or transfer delays.

Quick math: $20,000 at 4.5% APY earns about $900 in a year, assuming the rate stays flat.

Treasury bills (T-bills)

T-bills are short-term government debt. They are backed by the full faith and credit of the government and are exempt from state and local income tax. You can buy them directly through TreasuryDirect or a brokerage.

Quick math: a 26-week T-bill with a 5.1% discount yield turns $20,000 into about $20,500 at maturity. If your state tax rate is 5%, the state-tax exemption adds roughly $25 in value compared to a fully taxable savings account at the same rate.

Which to choose?

Use a high-yield savings account for money you may need on short notice. Use T-bills for cash you can lock up for a few months and do not mind moving through a brokerage. Many people use both.