Three places hold most of the spare cash in America: a high-yield savings account (HYSA), a money market fund, and Treasury bills. They pay within a fraction of a point of each other on most days, so the choice rarely comes down to yield alone.
The short answer is to sort by the job the cash has. Emergency money fits an insured HYSA or a government money market fund. Money with a known due date fits T-bills. A large balance in a high-tax state fits Treasury-based products. This piece is educational and is not financial advice or a recommendation for any individual’s situation.
What the Rate Table Says on October 20, 2026
Treasury publishes daily bill rates. On October 20, 2026, the 4-week bill showed a coupon equivalent of 4.00%, the 13-week 4.18%, the 26-week 4.37%, and the 52-week 4.48% (Treasury daily bill rates page, checked 2026-10-21). The coupon-equivalent column is the one that compares most closely to a savings APY, because the bank-discount column understates the yield.
HYSA rates are not published in one official table, and banks change them without notice. Treat any APY quoted in an article as a snapshot and confirm it on the bank’s own page before moving money. This article uses an illustrative 4.00% HYSA APY for the math below, not a real offer.
The Three Options at a Glance
| HYSA | Money market fund | T-bills | |
|---|---|---|---|
| Insurance | FDIC, up to $250,000 per depositor, per bank | None (a mutual fund) | Backed by the U.S. government |
| Access | Same day to a few days | Sell order, then 1-3 days to settle | Sell before maturity at market price, or wait |
| Yield behavior | Variable, set by the bank | Variable, follows short-term rates | Locked at purchase until maturity |
| State income tax | Taxable | Partly exempt if Treasury-heavy | Exempt |
| Fees | Usually none | Expense ratio | None on new issues at TreasuryDirect |
| Effort | Lowest | Low | Highest |
The FDIC states that deposits are insured to at least $250,000 at each insured bank, and that mutual funds, stocks, and bonds are not covered. SEC investor guidance says the same of money market funds: not guaranteed by the FDIC, with a small risk of losing value. TreasuryDirect lists the minimum T-bill purchase at $100 and the terms at 4, 6, 8, 13, 17, 26, and 52 weeks.
The High-Yield Savings Account: Boring on Purpose
An HYSA is a bank deposit that pays more than a brick-and-mortar savings account. It is insured, it is simple, and the money is available quickly.
The weak point is the variable rate. A poster in r/personalfinance described SoFi cutting its rate “again down to 3.10 pay when I used to have it at somewhere around 4.1.” The replies were split on whether it mattered. One said, “Don’t chase rates. They will always change. If you’re good otherwise, just stay there. You’re talking fractions of a percent.” Another put the stakes in dollars: “At $20k, a 1% difference is going to be a difference of $200 for the year.”
Both comments hold up. A rate cut hurts, but moving a modest balance for a few tenths of a point rarely pays for the hassle. For a larger balance, the arithmetic changes.
The Money Market Fund: Stable Price, Small Fee
A money market fund buys short-term debt and tries to hold a $1 share price. Treasury and government funds restrict holdings to government securities and cash-like instruments.
A poster in r/personalfinance who moved from an HYSA to a Fidelity cash management account described the appeal: “The 7-day yield has stayed relatively stable while I watched the APY in my HYSA dwindle down.” The same poster pointed to the tax angle, noting about 97% of the income was state tax exempt. That percentage belongs to one fund and one year; each fund publishes its own exempt share, and a fund holding repurchase agreements or agency debt will show a lower figure.
Two costs apply. A commenter in r/FinancialPlanning compared funds by expense ratio and listed figures between 0.11% and 0.42% a year, which comes to $11 to $42 on $10,000. Those figures came from the commenter and should be checked on each fund’s page. The other cost is speed. A r/personalfinance reply explained that a fund sale is “treated like any other mutual fund”: place a sell order, wait “1-3 days,” then transfer to checking “(another 1-3 days).”
On principal safety, the same r/FinancialPlanning thread noted the difference from direct Treasuries: “You also get the promise that $1 will always equal $1, just like a bank account. When you buy treasuries directly, you do not get that promise.” The promise is a fund policy, not an FDIC guarantee, which is why the SEC’s warning applies even to government funds.
T-Bills: Best for Dated Money
A T-bill is bought at a discount and pays face value at maturity. The gap is the interest. TreasuryDirect states that federal tax is due on that interest and that state and local tax is none.
The catch is the exit. A r/FinancialPlanning commenter who identified as a licensed advisor described the risk this way: “if you sell them before maturity you may have to sell them at a loss.” For a 4-week or 8-week bill the price swing is tiny, but the principle explains why bills suit planned spending better than surprise spending.
One poster described a clean use: “I usually save for predictable expenses in T Bill for the extra return,” with a property-tax bill in December covered by bills maturing in November. The same poster keeps the emergency fund elsewhere: “I maintain an emergency fund for unpredictable expenses in MMF for the convenience and stability.” That split is the most useful idea in the whole discussion.
Does the State Tax Edge Matter? A Worked Example
The state exemption is the one structural advantage T-bills hold. Its value depends entirely on where the saver lives.
A poster in r/investing made the limit clear: “If you live in Texas or Florida you don’t gotta pay those taxes on HYSA either. It’s only a benefit in states with high state taxes like Cali, New York, Oregon, etc.” Residents of states with no income tax on interest get no benefit from the exemption.
Take $20,000 for a year, an illustrative 4.00% HYSA, the 13-week bill at 4.18%, and a 6% state income tax rate. The numbers below ignore federal tax, which applies to both.
- HYSA: $800 of interest, minus $48 of state tax, leaves $752.
- 13-week T-bill, rolled over: $836 of interest, no state tax, leaves $836.
- Gap: $84 a year.
The break-even rule is simple. At a 6% state rate, an HYSA must pay about 4.45% to match a 4.18% bill after state tax. At a 0% state rate, it needs only 4.18%. Rolling bills also carries reinvestment risk, because the rate on the next bill may be lower.
The Opinion: Match the Account to the Job
The channel view is pro-individual-saver and skeptical of products sold on a half-point of yield. The case for an HYSA is strongest for the first few months of expenses, where being insured and reachable matters more than 0.2% of yield. A saver gives up about $20 a year on $10,000 for that certainty, which is a fair price.
The case for Treasury-based products strengthens as the balance and the state tax rate rise. At $50,000 in a high-tax state, the gap in the example above becomes a few hundred dollars a year, and that is worth an afternoon of setup. A saver with that much idle cash should also ask whether it all needs to be cash; the question of cash versus investing is covered in the robo-advisor comparison.
The counter-argument deserves credit: the headline yield differences are small, and complexity has a cost. Many replies in the r/personalfinance thread said as much, and a saver who never gets around to opening a brokerage account earns nothing extra. The right answer is the one that actually gets set up and left alone.
Two related checks round this out. High-interest debt beats any of these yields, so a balance carrying double-digit interest belongs in the debt snowball app guide before it belongs in a T-bill. And interest income from all three options shows up on a tax return, where the FreeTaxUSA vs TurboTax comparison covers filing costs. The IRS lists interest on bank accounts and money market accounts as taxable and generally expects a Form 1099-INT at $10 or more of interest.
Pick-by-Situation Guide
Pick the HYSA if the money is an emergency fund under roughly six months of expenses, the saver lives in a state with no income tax, or avoiding a brokerage account matters more than a few tenths of a point.
Pick a government money market fund if a brokerage account already exists, the balance is large enough for the expense ratio to be worth shopping, and speed of access within a few days is acceptable. A Treasury-only fund suits high-tax states best.
Pick T-bills if the cash is earmarked for a known date, such as a tax bill, tuition, or a down payment 6-12 months out, and the saver can hold to maturity. Bills can be bought at TreasuryDirect from $100 or through most brokerages.
Split the money if the balance is large. Many savers in these threads keep a core emergency fund in an insured account or fund and put dated money in bills. A health savings account for qualifying medical costs is a separate tool, covered in the HSA investing guide.
Frequently Asked Questions
Are T-bills better than a high-yield savings account?
Neither wins across the board. T-bill interest is exempt from state and local tax, while an HYSA is FDIC insured and reachable quickly. The yield gap is often small enough that convenience decides.
Is a money market fund FDIC insured?
No. A money market fund is a mutual fund, and the FDIC lists mutual funds among uninsured products. A money market deposit account at a bank is a different product and is insured up to $250,000 per depositor, per bank.
Can T-bill interest be taxed by my state?
TreasuryDirect lists state and local tax on T-bill interest as none, while federal tax is due. Treasury money market funds and T-bill ETFs pass through only the share of income from Treasuries, so the exempt percentage varies by fund and appears in its annual tax breakdown.
Where should an emergency fund go?
Most community advice points to an insured savings account or a government money market fund. T-bills fit money earmarked for a known date, since selling early can return less than was paid.
How often do high-yield savings rates change?
Banks can change an APY at any time, and rates tend to follow the Federal Reserve. Posters in r/personalfinance described a SoFi account falling from about 4.1% to 3.10%. A bank’s current rate should always be confirmed on its own page.
The Closing Rule
Cash earns its keep by being there on the worst day, so the emergency fund goes where access is certain and the dated money goes where the yield is highest. A few extra basis points never justify risking the first part for the second.
References
- U.S. Treasury, Daily Treasury Bill Rates, October 20, 2026 (checked 2026-10-21) — https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_bill_rates&field_tdr_date_value_month=202610
- TreasuryDirect, Treasury Bills (terms, $100 minimum, tax treatment; checked 2026-10-21) — https://www.treasurydirect.gov/marketable-securities/treasury-bills/
- FDIC, Deposit Insurance (checked 2026-10-21) — https://www.fdic.gov/deposit-insurance
- Investor.gov (SEC), Money Market Funds — https://www.investor.gov/introduction-investing/investing-basics/investment-products/mutual-funds-and-exchange-traded-5
- IRS, Topic no. 403, Interest received — https://www.irs.gov/taxtopics/tc403
- r/FinancialPlanning, “T Bills vs Money Market for short term high interest savings.” — https://reddit.com/r/FinancialPlanning/comments/1imn5lx/t_bills_vs_money_market_for_short_term_high/
- r/personalfinance, “High yield savings account” (SoFi rate cut thread) — https://reddit.com/r/personalfinance/comments/1ugvcqs/high_yield_savings_account/
- r/investing, “Why t-bills over HYSA if return rates are similar?” — https://reddit.com/r/investing/comments/16i870t/why_tbills_over_hysa_if_return_rates_are_similar/
