High-yield savings account vs. Treasury bill: Which is right for you?

Core Insights - As interest rates change, savers are seeking safe investment options to enhance their returns, with high-yield savings accounts and Treasury bills being two popular choices [1] High-Yield Savings Accounts (HYSA) - A high-yield savings account is a bank account that typically offers higher interest rates than standard savings accounts, with rates potentially reaching up to 4% APY or more [5] - These accounts are low risk and insured by the FDIC up to $250,000, making them suitable for emergency savings or funds needed in the short term [3][10] - The national average savings account rate is currently only 0.4%, indicating that traditional savings accounts may not provide sufficient returns [4] Treasury Bills (T-Bills) - Treasury bills are short-term government securities that pay guaranteed interest, with current rates ranging from 4.17% to 4.33% for terms of four to 52 weeks [6] - T-bills are considered very safe investments as they are backed by the U.S. government, and the interest earned is exempt from state and local taxes, which can be advantageous for investors in high-tax states [9] - Unlike high-yield savings accounts, T-bills have fixed interest rates and are less liquid, as they are better suited for funds that can be set aside for a longer period [8][10] Comparison of HYSA and T-Bills - The choice between a high-yield savings account and a Treasury bill largely depends on the investor's need for liquidity and access to funds [2][9] - HYSAs provide more flexibility for deposits and withdrawals, making them ideal for emergency funds, while T-bills are better for cash that can be invested for several months or longer [7][10] - Key factors to consider when choosing between the two include account fees, interest rates, fixed versus variable rates, time to maturity, and tax implications on interest earned [8]