Unraveling the Investment Puzzle: The TBill or the CD, Which Is Your Winning Option?

Let’s talk savings strategies! If you’re sitting on some extra money and want to make it grow without the risk, there are a couple of simple and safe options that you might consider: Treasury Bills (T-Bills) and Certificates of Deposit (CDs). These are both good ways to tuck away some money, but they have some differences that might help you choose what’s best for you.

T-Bills, in a nutshell, are short-term loans you give to the U.S government. You can buy them directly from the US Treasury or through your bank or broker. The terms can be as short as 4 weeks or as long as 52 weeks. You buy them for less than their face value, keep them until they mature, and then get their full face value back. For example, you might buy a $1,000 T-Bill for $975, hold onto it, and then get a cool $1,000 back.

A great thing about T-Bills is they’re low commitment. You don’t have to tie up your money for very long, with terms up to just one year. You might miss a surge in market rates, but you can sell them early without any penalty if you need to.

CDs, on the other hand, are essentially savings accounts with a promise not to withdraw your money for a set period or term. You can open a CD at most banks or credit unions. The term options for CDs are very flexible, from one month to several years. However, don’t forget that taking out your money earlier than planned usually involves a penalty fee unless you have a special “no penalty” CD.

One of the reasons people might prefer CDs is that they often offer higher rates if you can commit to leaving your money alone for longer. You get a fixed rate for the term, so if rates drop, you’ll keep earning the same amount. But if you opt for a long-term CD, you’ll have to consider whether inflation will undermine your fixed rate.

So, what’s the verdict? Both T-Bills and CDs are reliable, safe choices for people who want to avoid investment risks. Your main decision factors might be around taxes and interest rates. T-Bills are exempt from state and local taxes, which could save you a good chunk of money if your investment is substantial. CDs are fully taxable, but they might offer better rates that even out or surpass T-Bills’ tax advantage. If you’re investing an odd sum or want more flexibility, CDs might have an edge because you can deposit any amount, unlike T-Bills that come in $100 chunks.

One final tip, if you’re not comfortable choosing, there’s another option. Check out Public.com’s Treasury account that gives you a T-Bill or CD-like rate but with the liquidity of a checking account, and without restrictions like minimums or maximums.

Whether you’re leaning towards T-Bills or CDs, you’re making a smart choice to let your money grow in a stable, low-risk way. Always remember to consider your individual financial situation, your patience for sticking with an investment, and the current market when deciding.