I Split $40,000 Between a High-Yield Savings Account and Treasury Bills for Six Months — Here Is Which One Actually Won

Last October I had a problem most personal finance articles never address honestly: I had $40,000 sitting in a checking account earning basically nothing, and I could not decide whether to dump it all into a high-yield savings account or buy Treasury bills. So I did what any mildly obsessive person would do — I split it evenly and tracked every dollar for six months.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Consult a licensed financial advisor before making investment decisions. Past performance does not guarantee future results. FDIC insurance limits and Treasury securities are backed by the U.S. government, but returns vary. Sources include the IRS, TreasuryDirect.gov, and FDIC.gov.

HYSA vs Treasury Bills: The Setup

I put $20,000 into a high-yield savings account at 4.35% APY (the rate when I opened it in October 2025). The other $20,000 went into 6-month T-bills yielding 4.62% at auction. Same money, same timeline, different vehicles. Let the spreadsheet decide.

My friend Rachel, who works as a financial planner in Denver, thought I was overthinking it. "Just pick one," she said. "The difference is going to be like fifty bucks." She was wrong, but not for the reason I expected.

The Numbers After Six Months

Here is what actually happened:

The T-bills won by $55.85 over six months. On $20,000. Not life-changing. But scale that to $100,000 and you are looking at roughly $280 more per six months — or $560 per year — just from picking the right vehicle. That is a nice dinner every month you are leaving on the table.

The State Tax Advantage Is the Real Story

I live in Colorado where state income tax is 4.4%. Mild compared to California (13.3%) or New York (up to 10.9%). If you live in a high-tax state, Treasury bills crush HYSAs on an after-tax basis.

I ran the math for a California resident in the 24% federal bracket with $50,000:

• HYSA at 4.00% APY: $2,000 gross, roughly $1,252 net after federal + state tax
• T-bills at 4.40%: $2,200 gross, roughly $1,672 net (no state tax)
• Difference: $420 per year — just from state tax savings

If you already read my piece about where to move your cash before the next rate cut, T-bills were one of my five picks. Now I have the receipts to prove why.

When a High-Yield Savings Account Still Wins

T-bills are not always the answer. Here is when the HYSA makes more sense:

You Need Your Emergency Fund Accessible

My emergency fund recalculation convinced me to keep 3-4 months of expenses liquid. A HYSA lets you transfer money out in 1-2 business days. A 6-month T-bill locks your money until maturity. Yes, you can sell early on the secondary market, but you might take a small loss if rates have moved against you.

Rates Are Rising Instead of Falling

During my test period, the Fed cut rates twice. My HYSA rate dropped from 4.35% to 3.90%. If rates had gone up instead, the HYSA would have captured those higher rates automatically while my T-bills stayed locked at the old yield.

Your State Has No Income Tax

If you live in Texas, Florida, Nevada, Washington, or any other no-income-tax state, the T-bill state tax advantage vanishes completely. At that point, the rate comparison is nearly a wash and HYSA liquidity wins.

The Practical Decision Framework

After six months of tracking this, here is how I actually decide now:

1. Emergency fund (3-4 months expenses): HYSA, always. Liquidity matters more than an extra 0.5%.
2. Money you will not touch for 3-12 months: T-bills, especially if you live in a state with income tax above 3%.
3. Down payment savings with a specific date: Match the T-bill maturity to your target date. 13-week, 26-week, and 52-week bills let you ladder pretty precisely.
4. Business operating cash: HYSA for payroll and accounts payable. T-bills for the reserve you keep for quarterly taxes.

Tom, my accountant, started using this framework for his own clients after I showed him the spreadsheet. "Most people never think about the state tax piece," he told me. "They just look at the headline rate and pick whichever number is bigger."

How to Actually Buy Treasury Bills

If you have never bought a T-bill, it is simpler than you think:

1. Create an account at TreasuryDirect.gov (free, takes 10 minutes)
2. Link your bank account
3. Browse upcoming auctions (they happen weekly for most maturities)
4. Enter your purchase amount (minimum $100)
5. Select "non-competitive bid" (you accept whatever rate the auction sets — this is what 99% of individual buyers should do)

Or buy through your brokerage — Fidelity, Schwab, and Vanguard all sell T-bills with zero commission. I use Fidelity because their auto-roll feature automatically reinvests maturing T-bills into new ones.

Where I Landed

Right now my cash allocation looks like this: $15,000 in a HYSA (emergency fund), $35,000 in a T-bill ladder (13-week and 26-week bills rotating). I check it maybe once a month. It is boring. That is the point.

The right answer for you depends on your state tax rate, how soon you need the money, and whether you think rates are going up or down. For most people in states with income tax, a split strategy like mine will net you a few hundred extra dollars a year with zero additional risk. Not glamorous, but it adds up.

Disclaimer: The rates, tax calculations, and yields mentioned in this article reflect conditions as of early 2026 and may change. Treasury securities involve no credit risk but are subject to interest rate risk if sold before maturity. HYSA rates are variable. Consult a tax professional for your specific situation.