How Treasury bills work, and what they pay

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.

What this lesson is NOT

Treasury bills are a short-term, safe place to park dollars, not a growth investment and not a long-term hedge against inflation. This lesson explains how they work and where to buy them; it does not compare them to every other safe option.