Treasury Bills (T Bills)
Treasury bills are short term loans to the US government. They are considered one of the safest places to park money for a short time while earning a predictable return.
What Is a T Bill?
When you buy a T bill, you are lending money to the US government for a short period, often a few weeks or a few months. At the end of the term, you get your money back.
The simple version:
You lend the government money; the government pays you back a bit more later.
How T Bills Make Money
T bills come in short terms. You choose how long you want your money parked.
You usually buy a T bill for a little less than its full value, then get the full value back at maturity. The difference is your return.
Why People Use T Bills
Parking money you need in a few months, like a car fund
Holding cash while waiting to invest in stocks or funds
Keeping money very safe while still earning interest
Building a habit of letting money work instead of sitting idle
A Smart Strategy: Laddering
Laddering means splitting money into multiple T bills that mature at different times. This gives you regular access to cash without keeping everything in one big pile.
Simple example:
- Buy a 4 week T bill with part of your money
- Buy an 8 week T bill with part of your money
- Buy a 13 week T bill with part of your money
- When one matures, you can spend it or buy a new one
What to Watch Out For
It is safe, but it is still a decision
If you buy a T bill, your money is parked until it matures. If you might need the money tomorrow, keep it in checking or savings instead.
Teen friendly rule:
Only use T bills for money you are confident you will not need until the term ends.
Key Takeaway
T bills are a simple, low risk way to earn interest on money you will not need for a short period. They are a great bridge between banking and investing; you can keep money safe while it still earns.