The cost of a low rate
Savings accounts have paid less than half what Treasury bills pay
Treasury bills are short‑term loans to the U.S. government, sold for terms of 4 to 52 weeks and backed by the full faith and credit of the United States.[2][1]
Across all 4,313 FDIC‑insured banks, the interest actually paid on savings and money market deposit accounts averaged about 1.72% from mid‑2025 to mid‑2026.[12] Over the same 12 months, 4‑week Treasury bills averaged 3.75%.[10]
The FDIC's national average savings rate was 0.37% on September 21, 2026.[13]
U.S. households held about $6.6 trillion in savings and money market deposit accounts in mid‑2026.[14] At the gap above, that cash earns roughly $134 billion a year less than short Treasury bills.
Adding certificates of deposit and money fund expenses brings the estimate to $150 billion to $210 billion a year.
| Cash held | At 0.37% | At 1.72% |
|---|---|---|
| $8,000 (median family) | about $270 a year | about $160 a year |
| $50,000 reserve | about $1,690 a year | about $1,010 a year |
| $62,500 (average family) | about $2,110 a year | about $1,270 a year |
Interest given up each year at the FDIC national average savings rate (0.37%) and at the average rate banks actually paid (1.72%), compared with 4‑week Treasury bills at their 3.75% average from October 2025 to September 2026. Family balances are transaction accounts in the Federal Reserve's 2022 Survey of Consumer Finances, the latest published.[15] Bank rates include business depositors because household‑only rates are not published.
Seven tests
What a cash reserve needs to do
- Federal backing you can name
Banks can fail, and the economy goes through rough stretches. Federal backing puts that risk on the federal government.
Treasury securities carry the full faith and credit of the United States.[1] Bank deposits are FDIC insured up to $250,000 per depositor, per ownership category, at each bank.[3]
- Stable value when you need it
A reserve should be worth what you put in on the day you need it. A savings account always is, because a dollar in is a dollar out. A Treasury bill that matures in six months or less comes very close. Its price barely moves, and it pays its full face value when it matures.
Longer Treasuries, one year and beyond, are just as federally backed, but their prices fall when interest rates rise. Sell one before it matures and you can get back less than you put in.
- Fast access
Money moved between savings and checking at the same bank is usually available right away. A Treasury bill sold at a brokerage settles one business day after the sale, the standard since May 28, 2024,[6] and then the money moves to your bank.
Transfers between institutions usually take one to three business days and vary from one institution to the next. In practice, almost every option here can put spendable money in your account within two to three business days.
- A competitive rate
Small differences in rate are worth real money. On a $50,000 reserve, every quarter point is about $125 a year, and a full point is $500 a year.
Over ten years, with the interest reinvested, earning 4% instead of 3% leaves you with close to $7,000 more. That's why a few tenths of a point matter when we compare options.
- A rate that lasts
We exclude promotional, introductory, and new‑account‑only rates, and any rate that depends on direct deposit or monthly deposits. We check whether existing customers earn the advertised rate.
- Simple to maintain, with low costs
For a cash reserve, there are two practical ways to own Treasury bills.
Buy them yourself in a brokerage account, such as Schwab, Fidelity, or Vanguard.[16] Bills are sold at weekly auctions,[2] so learn how your broker buys them and whether it can reinvest them automatically when they mature.
Hold a low‑cost Treasury bill fund, which does the buying and reinvesting for you for a small fee. One example is Vanguard's 0‑3 Month Treasury Bill ETF (VBIL), with a 0.06% expense ratio.[20] The fund itself carries no federal guarantee, so you accept a small added layer of risk for that convenience.
You can also buy bills directly from the government at TreasuryDirect.gov, but it's too clumsy for a cash reserve. You can't sell a bill there. To get your money before a bill matures, you have to hold it at least 45 days, then move it to a brokerage and sell it there.[17]
Other money market funds are a separate category. Some pay a little more, especially funds that lend to banks and corporations. That extra yield comes with extra risk, because much of what those funds hold has no federal backing, and the funds themselves are not insured or guaranteed.[4] SIPC does not protect against a decline in value.[5] So we do not treat them like a Treasury bill or an FDIC‑insured account.
Price risk
Why we keep the reserve in short Treasury bills
There's one more temptation when you want a little more interest. Instead of short Treasury bills, you buy longer Treasuries, like a 1‑year bill or a 2‑year or 3‑year note.[19] They pay more today. Here's why that's a bad idea for your cash reserve.
Their prices move when interest rates change. We tested 6‑month, 1‑year, 2‑year, and 3‑year Treasuries on every trading day from January 1990 to October 2026, assuming the money had to come out after 3 or 6 months.[11]
Sold after 3 monthsSold after 6 months
Total return including interest earned, for every trading day from January 1990 to October 2026. Historical market data, not the results of any GTF client account.[11]
| Holding | Per 1 point rate move | Loss after 3 months | Worst 6 months, $50,000 |
|---|---|---|---|
| 6‑month bill | about 0.5% | 1.5% of the time | no loss |
| 1‑year bill | about 1.0% | 5% of the time | about $500 |
| 2‑year note | about 1.9% | 14% of the time | about $1,755 |
| 3‑year note | about 2.8% | 24% of the time | about $2,820 |
From 2016 to 2026, 1‑year to 3‑year Treasuries earned less than rolling short bills on average and trailed them more than half the time. In 2022, 2‑year and 3‑year notes trailed bills in 85% to 92% of 3‑month periods, while 6‑month bills barely moved.
Our approach: keep the emergency reserve in Treasury bills of 26 weeks or less, set to reinvest automatically, or in an FDIC‑insured account that pays more after taxes. Money for a known purchase two or three years out can go in a Treasury that matures on that date.
Rates on October 5, 2026
Treasury bill rates
| Treasury bill | Market rate | Missouri tax‑equivalent rate |
|---|---|---|
| 4-week | 3.95% | 4.14% |
| 13-week | 4.15% | 4.35% |
| 26-week | 4.31% | 4.52% |
Coupon‑equivalent market rates from the U.S. Treasury, refreshed daily from Treasury's published data.[10] Treasury interest is exempt from state income tax,[7] so the tax‑equivalent rate shows what a bank would need to pay to match it, assuming Missouri's 4.7% top income tax rate.[8] Bill interest is subject to federal income tax, generally in the year the bill matures.[9] Rates change daily.
Citations
- TreasuryDirect: Marketable securities
- TreasuryDirect: Treasury bills
- FDIC: Understanding deposit insurance
- SEC Investor.gov: Mutual funds
- SIPC: What SIPC protects
- SEC Investor.gov: T+1 settlement bulletin
- 31 U.S.C. 3124 (Cornell LII)
- Missouri Revised Statutes 143.121
- IRS Publication 550
- U.S. Treasury: Daily bill rates
- U.S. Treasury: Daily par yield curve
- FDIC BankFind: Bank financial data
- FDIC: National rates and rate caps
- Federal Reserve: Financial Accounts (Z.1)
- Federal Reserve: Survey of Consumer Finances
- TreasuryDirect: Buying a Treasury marketable security
- TreasuryDirect: Selling a Treasury marketable security
- Federal Reserve Bank of Dallas: Reciprocal deposit networks and deposit insurance
- TreasuryDirect: Treasury notes
- Vanguard: 0-3 Month Treasury Bill ETF (VBIL)
This article is general education based on public market data and GTF's analysis of it. It does not show the results of any GTF client account, and past results do not guarantee future results. Rates are as of the dates shown and change often. Treasury securities sold before maturity can lose value. Money market funds are not FDIC insured. This is not a recommendation for any particular household. Your reserve depends on your spending, income, and plans. Naming a brokerage, custodian, or fund is not an endorsement. Read a fund's prospectus before investing.