Who is buying T-Bills for their Emergency Fund?

[jane_doe]

I'm wondering how many people in this community are investing in T-Bills directly using TreasuryDirect.gov? I see HYS recommended frequently as a safe place to park cash but rarely if ever do I see T-Bills mentioned. Even with a job loss, medical emergency, major car repair, etc. you won't need all of you emergency fund immediately (30 day billing cycle on credit card). I park one months living expenses in HYS and the rest of my emergency fund is in four week T-Bills currently paying 5.365% which is slightly over 1% higher than my HYS.

TreasuryDirect.gov is a little clunky but for an easy extra 1% return its worth the effort.

 

[resjudicata]

@jane_doe I do rolling 4 week t bills also. Half week 1 half week 3, so there is never more than 2 weeks between maturity.

I do direct at treasurydirect because my brokerage (vanguard) won't automatically roll them.

Idk why people think a HYSA is better. I doubt HYSA ever paid more than 4 week tbills, but I could be wrong

 

[allena7]

@resjudicata What rates are you getting? This seems a lot more complicated than using a money market fund which are paying as much as 5.28% right now. What’s the upside to using t-bills?

 

[samantham]

@allena7 No state taxes on the interest earned

 

[isthisreal]

@samantham There’s plenty of money market funds that have underlying investments that are state tax exempt. I have my emergency fund in Merrill invested in TTTXX which is 100% state tax exempt. Vanguard’s default settlement acct money market fund is like 40-50% state tax exempt

 

[chrismonolo]

@allena7 My last 26-week was about 5.33%. So 26 weeks guaranteed and savings of state income tax makes it an easy call.

 

[resjudicata]

@allena7 Currently the 4 week is at about 5.37%. The yield curve is inverted so the shorter, the higher the yield. But that's not usually the case.

It really isn't difficult at all because you set it up once and it auto rolls for 2 years.

When the yield curve goes back to normal it'll pay more than a MMF (if it isn't already)

https://www.cnbc.com/bonds/

 

[monocle]

@resjudicata Do you use treasury direct or what platform do you use?

 

[resjudicata]

@monocle Treasurydirect. If I had Fidelity, I'd use that instead. But I have vanguard and they don't automatically roll them which is a dealbbreaker. At treasurydirect it will auto roll for up to 2 years if you choose.

 

[godschild08]

@resjudicata Why not open a fidelity account for this?

 

[resjudicata]

@godschild08 I don't want two brokerage. My IRAs and 401k are at Vanguard. Can't move the 401k since still employed.

 

[godschild08]

@resjudicata But why not? It would just replace your Treasury Direct account, be easier to use, and have greater benefit.

 

[resjudicata]

@godschild08 Edit to add: I also own I-bonds which you can only buy from treasurydirect

I'm sure it would make sense for people who don't have either yet, but for me I'm used to treasurydirect. I've never had any issues and it's already all set up and linked to my bank. So, at this point, sunk costs. I'd have to open a new account, link banks, and transfer around in order to move.

 

[godschild08]

@resjudicata I have no issue with Treasury Direct and but all of my T-bills there in addition to I-bonds.

But I also have two brokerage accounts - Schwab and Fidelity, so I’m unclear why adding another brokerage presents an issue if there is benefit.

 

[resjudicata]

@godschild08 Since I already have to have vanguard (for my 401k) and treasurydirect (for my Ibonds), why would I need a third? I see no benefit in using fidelity over treasurydirect as I've had no issues with Treasury direct.

There is nothing inherently wrong with having two brokerages. But why if there's no benefit?

 

[parmela]

@resjudicata That. You have sound reasons. I also like consolidation.

 

[df623]

@resjudicata Two weeks between maturity isn’t a big deal either. If you need to you can let whatever the expense is sit on a credit card for a couple weeks and still pay it off before accruing any interest charges.

 

[chrismonolo]

@df623 That’s my logic as well. I have 52-wk bills that pay in the middle of each month and 24-month ones that pay on the 1st of the month.

 

[jane_doe]

@resjudicata I didn't know that they could even be bought via Vanguard but now that I know you can't roll them there...that is a deal killer.

 

[resjudicata]

@jane_doe Yeah, you can buy tbills, notes, bonds at auction and on the secondary market at vanguard. You can also sell on the secondary market. For longer terms it wouldn't matter, but for every 4 weeks I'm not going in there and rolling it manually.