Treasury bills (T-bills) for beginners
Short-term loans to the U.S. government, considered the safest dollar investment in the world. How they work and where to buy them.
Written for plain-English understanding by Joseph Citizen. Why I built this →
A Treasury bill is a short-term loan you make to the U.S. government. Common terms are 4 weeks, 8 weeks, 13 weeks, 26 weeks, and 52 weeks. They are considered the safest dollar-denominated investment in the world because they are backed by the U.S. government.
How they actually work
T-bills are sold at a discount to their face value. If a 26-week T-bill has a face value of $1,000 and you buy it for $980, you collect the full $1,000 when it matures. The $20 difference is your interest.
Where to buy them
- TreasuryDirect.gov — the U.S. government's own platform. No fees, but the interface is dated.
- Most major brokerages — Fidelity, Schwab, Vanguard. Easier interface, no fees on Treasury auctions.
- Treasury ETFs — funds like SGOV or BIL that hold short-term Treasuries. Easiest if you want one-click exposure.
Tax treatment
Interest from Treasuries is taxable at the federal level but exempt from state and local income tax. In high-tax states like California, New York, and New Jersey, this can make T-bills meaningfully better than a CD or HYSA paying the same headline rate.
Quick check on this lesson
Answer each question and we'll show you why the right answer is right — and why the others aren't.
- 1.
What are Treasury bills (T-bills)?
- 2.
How do T-bills technically pay you?
- 3.
What TAX advantage do T-bills have, especially for high-tax-state residents?
0 of 3 answered
Keep the momentum going.
I-Bonds: inflation-protected savings
A government savings bond whose interest rate adjusts with inflation. Useful for medium-term savings, with some annoying restrictions.
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Important
This lesson is general financial education only. It is not personal investment, tax, accounting, or legal advice. Examples are illustrative. Past performance does not guarantee future results.