T-Bills vs CDs vs Money Market Funds (2026): Where to Keep Cash After the Fed’s Rate Rise

Why the question matters again

On 16 September 2026 the Federal Reserve raised its target range for the federal funds rate to 3.75%–4.00%, its first increase since July 2023, after inflation picked up again; consumer prices were 3.4% higher in August than a year earlier, with energy prices up sharply. Most Fed officials projected rates ending the year a little higher still, and the next meeting is on 27–28 October. For savers, that means short-term cash can earn around 4% in the right place, while money left in an ordinary bank account often earns almost nothing. The four common homes for cash each trade yield against tax, safety and access in a different way.

The four options at a glance

• Treasury bills: on 8 October 2026, 1-month bills yielded 4.14%, 3-month 4.23%, 6-month 4.30% and 1-year 4.44%, based on the Treasury yield curve.
• Certificates of deposit: the FDIC’s national average for 12-month CDs was 1.73% in September 2026, but the best advertised online offers for one year were about 4.50% to 4.75%.
• Money market funds: large government funds showed 7-day yields of roughly 3.5% to 3.8% in early October, after fees.
• High-yield savings accounts: the best ongoing rates were about 4.25% to 4.34%, against a national average of 0.37% for savings accounts.

On $20,000 held for a year, the gap is easy to see: about $888 at 4.44%, about $700 at 3.5% and about $74 at the average savings rate of 0.37%, before tax. Rates on savings, money market funds and new CDs move with the Fed, so these figures are a snapshot, not a promise.

Tax: the hidden advantage of T-bills

Interest on Treasury bills is taxed by the federal government but is exempt from state and local income tax. CD and savings interest is taxed by both, and money market fund income is generally taxed by both too, although part of a government fund’s income may be exempt from state tax where it comes from Treasuries, and municipal money market funds aim for income free of federal tax. For someone paying a 9.3% state income tax rate, a 4.23% T-bill is roughly equivalent to a 4.66% fully taxable CD, before considering federal deductions. In states with no income tax, the advantage disappears and the highest headline rate usually wins.

Safety: who stands behind your money

Bank deposits, including CDs and savings accounts, are insured by the FDIC up to $250,000 per depositor, per insured bank, for each account ownership category, and credit union deposits have the same limit through the NCUA. Treasury bills are not insured, because they are direct debts of the US government, which is the strongest credit available in dollars. Money market funds are investments rather than deposits and are not insured, but SEC rules restrict them to short-term, high-quality assets, and government funds keep at least 99.5% in cash, government securities and fully collateralised repurchase agreements. Reforms adopted in 2023 removed the ability of funds to block withdrawals and raised the share of assets they must be able to turn into cash within a day or a week. If a brokerage firm fails, SIPC protects the fund shares you hold there, but not a fall in their value.

Access: how quickly you can get your money

• Savings accounts and money market funds: usually available the same or the next business day.
• Treasury bills: repaid in full at maturity, from four weeks to a year; bills held at a broker can be sold earlier, at a price that may be slightly higher or lower than you paid.
• Bank CDs: money is locked in until maturity, and early withdrawal usually costs a penalty, commonly 60 to 180 days of interest on a one-year CD.
• Brokered CDs, bought through a broker: cannot normally be cashed in early, only sold on the secondary market, where their price falls if rates have risen; some can also be called by the issuing bank.

The best home for cash depends less on the highest rate than on when you will need the money.

Locking in versus staying flexible

A CD or a 1-year T-bill locks in today’s rate, which helps if rates fall but leaves you behind if they keep rising. A money market fund or savings account follows rates up and down. Many savers split the difference by building a ladder: money spread across bills or CDs that mature at different dates, so part of it comes due every few months and can be reinvested at whatever rates are then on offer. Our bond ladder calculator shows how that works for any amount and term.

Which might suit which need

• An emergency fund: a high-yield savings account or a government money market fund, because the money must be available immediately.
• A known expense in six to twelve months, such as a tax bill or a house deposit: a T-bill or CD that matures just before the date, so the price on the day cannot move against you.
• High earners in high-tax states: T-bills, or a Treasury-only money market fund, because of the state tax exemption.
• Large balances above $250,000: T-bills, a government money market fund or deposits spread across several banks, to stay within insurance limits or rely on government backing.

Rates in this guide were checked in early October 2026 and change constantly; check current yields before deciding. This article is general education, not personal financial or tax advice.

This article is educational and general in nature. It isn’t personalized investment, tax, or legal advice — always weigh your own circumstances, or talk to a licensed professional, before making financial decisions.

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