In this episode of ThimbleberryU, we dive into the hype and misinformation around Treasury bills (T-bills) that’s been circulating across social media platforms. We’ve all seen the claims: “risk-free,” “better than savings accounts,” “Warren Buffett approved,” and “perfect for retirement.” But are they really that simple? Amy Walls from Thimbleberry Financial breaks down what’s true, what’s misleading, and what actually matters when it comes to investing in T-bills.
We start by clarifying what T-bills actually are—short-term loans to the U.S. government, ranging from four weeks to a year. You buy them at a discount, and the difference between the purchase price and the face value at maturity is the interest you earn. While social media often touts them as risk-free, we explore why that’s only partially true. T-bills carry almost no credit risk, but they do carry inflation risk—if inflation outpaces your return, you're effectively losing money.
Next, we tackle the common claim that T-bills always outperform savings accounts and CDs. In some market conditions, that’s accurate—especially since T-bills are exempt from state and local taxes—but not always. High-yield savings accounts or promotional CDs can sometimes be more competitive. The idea of “guaranteed returns” is also addressed; while T-bills pay a set amount, they don’t roll over automatically, which means you need to be actively involved to maintain any momentum.
We also discuss the often-referenced Warren Buffett angle. Yes, Buffett uses T-bills—but only as a parking lot for cash while waiting on bigger investment opportunities. He doesn’t treat them as a core piece of his long-term strategy, and neither should the average investor without considering context and goals.
When it comes to retirement planning, T-bills can be part of the equation—but they aren’t universally ideal. They work for retirees focused on capital preservation, but younger investors risk missing out on growth if they lean too heavily on T-bills. We emphasize that T-bills are a tool, not a one-size-fits-all solution. Again, diversification of investments is key.
The takeaway is clear: T-bills can serve a purpose—whether as a component of a cash reserve or a conservative bond alternative—but only when used with intention and in alignment with a broader financial strategy. Social media often oversimplifies investments for the sake of attention. We encourage listeners to approach these decisions thoughtfully and critically.
00:00 – Introduction & T-Bill Hype on Social Media
00:47 – What Are T-Bills, Really?
01:46 – Are T-Bills Risk-Free?
03:00 – T-Bills vs. Savings Accounts and CDs
03:53 – “Guaranteed Returns” – Fact or Fiction?
05:08 – The Warren Buffett Argument
06:00 – Are T-Bills Good for Retirement?
07:13 – Using T-Bills Strategically
08:43 – The Real Lesson on Financial Tools
09:25 – How to Connect with Thimbleberry Financial
ThimbleberryU 145 - T-Bill Myths On Social Media
Speakers: Jon Gay & Amy Walls
[Music playing]
Jon Gay (00:07):
Welcome back to ThimbleberryU. I am Jon Jag Gay, I'm joined as always by Amy Walls from Thimbleberry Financial.
Always a highlight of my month to talk to you, Amy.
Amy Walls (00:15):
Jag, it's always mine too.
Jon Gay (00:16):
And today, we're talking about something that's gotten a lot of traction lately on social media. Treasury bills, or as they're also known, T-bills. they're kind of the star of social media money talk lately.
Influencers are calling them risk-free, guaranteed, better than savings accounts, even Warren Buffett approved. How much of that is true? How much of this is just hype? Amy is here to separate fact from fiction.
Amy Walls (00:39):
I'm ready, Jag, let's dig in.
Jon Gay (00:41):
Alright, let's start at the beginning. Obvious question to start (for those who aren't familiar), what exactly are T-bills?
Amy Walls (00:47):
So, T-bills, or treasury bills (as you had mentioned), are short-term loans that an individual can make to the U.S. government. The terms of a T-bill range from four weeks up to a year.
And basically, what happens with a T-bill is you buy them at a discount, and then you get full-face value at that maturity. Maturity being the four weeks to a year timeframe. And so, that difference between what you bought them at and what they mature at is your interest earned.
Jon Gay (01:18):
So, I'll use round numbers here and I know these aren't going to be accurate numbers, but the face value is $500, you buy it at $400, you get the $500 back at the end. That $100 to make it up to the face value is your interest.
Amy Walls (01:32):
Exactly, you got it. You're an expert.
[Laughter]
Jon Gay (01:35):
No, you are the expert. I am just here to try to translate it in terms that I can understand. Alright, so, when social media says “risk-free” there's something to that?
Amy Walls (01:46):
Well, they're not wrong about credit risk. The government is extremely unlikely to default. But they are wrong to call them entirely risk-free. There is inflation risk. So, if inflation is higher than your yield, your purchase power goes down.
So, what I really mean by that (in the example you just used), if inflation during the period of time you held the T-bill would have caused that value, that inflation to be more than the $100, well, then, the T-bill didn't keep up with inflation, and so you actually lost money.
Jon Gay (02:26):
That makes sense. You really have to think about that, it's not just the pure numbers of the bill. You have to factor in inflation and that $100 you made on the example we gave. With inflation, that might be less than $100 and you came out in the red so to speak.
Amy Walls (02:39):
So, going back to your question, are they risk-free? That is the risk, but I think where people get hung up here is: safe doesn't mean it's perfect.
Jon Gay (02:50):
Okay, I like that. Alright, so the next thing we hear these influencers say (chuckles) is that T-bills always beat savings accounts and CDs. Is that actually true, Amy?
Amy Walls (03:00):
Well, we just had an example about inflation; here I'm going to say it depends. Sometimes the answer is yes. Today's yields often beat basic savings accounts. They're also exempt from state and local taxes, which helps.
So, when you factor in the tax bill, that can help additionally. But high-yield savings or promotional CDs can be very competitive. So, that “always” is a little too strong in my opinion.
Jon Gay (03:30):
I think I've mentioned in a previous episode when the rates went up, I opened up a high-interest savings account because I was getting interest on it, which hadn't happened in years. I'm like, “Well shoot, if I'm saving money, I may as well put it away and have it work for me.” So, I totally hear where you're coming from there.
Okay, and this is another one from TikTok: “Guaranteed returns, just set it and forget it. T-bills are guaranteed returns.” Is that really how they work?
Amy Walls (03:53):
Yes. You set it, you buy it, and you forget it. If that's what you're considering “set it and forget it,” then that's true. But we just talked about maturities that are from four weeks to a year. These don't automatically roll over like CDs at your bank often do roll over.
And so, you'll just keep going earning the interest, this is going to stop at the end of your maturity unless you act. So, in that sense, it's not true. So, Jag, you might be sensing a theme or taking what's being said and social media has some truth to it, but there's often more nuance that is needed to understand the full picture.
Jon Gay (04:38):
(Sarcastically) Wait a second, Amy, are you saying that a lot of posts on social media are black and white in one camp or the other with no shades of gray? Color me shocked.
Amy Walls (04:49):
(Laughs) Well, we know that happens in other areas, but it also happens with the finance influencers.
Jon Gay (04:56):
That is fair. Okay, the next claim we see is invoking of the great name of Warren Buffett. “Warren Buffett loves T-bills, he's rich, he knows everything about investment. If it's good enough for Warren Buffett, shouldn't it be good enough for the rest of us?”
Amy Walls (05:08):
Oh, Jag.
[Laughter]
Amy Walls (05:10):
Jag, Jag, Jag. It is true that Buffett uses T-bills, but he uses them as a cash parking lot for billions while waiting for bigger investments.
Jon Gay (05:22):
So, he lets them sit there and make a little bit of money while he's waiting to do something a little more aggressive with it?
Amy Walls (05:26):
Yes, he is not using them as his long-term wealth strategy. There is a massive difference between those things, so context matters. And no one's situation, except Buffet's, is Buffet's.
Jon Gay (05:40):
That is a very fair assessment. If it's not a big tool for his billions, it's probably not a big tool for your thousands or whatever your situation is (chuckles).
The next claim, “T-bills are perfect for retirement, and anyone can use them.” I think I know the answer to this question, but I'll ask it anyway. Amy, is that really smart retirement planning?
Amy Walls (06:00):
Well, a little like what we talked about with the nuance, there is some definite oversimplification that's happening in that statement. T-bills can make sense for retirees who need capital preservation, and there's a lot of those out there. But younger investors risk missing long-term growth by putting too much money in T-bills.
Essentially, what we want to think about is that T-bills are a tool just like any other investment or with the basement remodel we have going on right now, the tools that the contractors are using. They are not a universal solution for your financial goals.
Jon Gay (06:41):
And as we've talked about in, now 145 episodes of this podcast, the importance of diversification. You don't want to put all your eggs in one basket. That would include T-bills, right?
Amy Walls (06:49):
That's exactly right. Here's where I think an important distinction comes into play. And this is something to ask yourself if you are considering using T-bills: “Am I using the T-bills as a cash reserve or as a bond replacement?” If your answer is both or neither, walk away.
[Laughter]
Amy Walls (07:13):
As a cash reserve (if that's your answer), think emergency funds, short-term spending, or money you'll need soon. This is what Buffet is doing, but his cash reserve is so big, it's just between investments.
And as a cash reserve, they can work well for a portion of a cash reserve, not the whole thing. They're safe, they're liquid, and earning often more than a checking account.
If your answer was, I want to be using T-bills as a bond replacement, the shorter maturities mean less interest-rate risk, but also less yield than longer term bonds. So, there's give and take there.
And that changes how the rest of your portfolio has to work harder for growth. So, it's going to change the dynamic potentially of your overall portfolio. So, my point here is, without a strategy of determining what T-bills are doing for you, why you're using them as a tool, it's easy to end up misaligned.
Jon Gay (08:19):
This is a theme that we have seen so much, Amy, where either it's a social media influencer or it's somebody on a website, television, any kind of talking head, “Oh, this particular investment tool is the latest, greatest end all be all.”
And we got to bring them back to reality (our listeners) and say, “It can be a great tool if used properly as part of a larger portfolio that is well diversified.”
Amy Walls (08:43):
Yep, I'm not going to use a paintbrush to install a door lock-
[Laughter]
Amy Walls (08:51):
On a new door. It doesn't make sense.
Jon Gay (08:54):
So, the big lesson, T-bills can be useful, but only if you know why you are using them.
Amy Walls (09:00):
Yes. We need to not follow a social media sound bite. We need to use critical thinking skills and make sure they fit our personal plan.
Jon Gay (09:10):
I will keep that in mind when I am mindlessly scrolling on the couch a little later tonight (laughs), perfect note to end on.
Amy, if one of our listeners wants to come talk to you at Thimbleberry Financial regarding their financial future and the various tools that you work with, with your clients, what are the best ways to find you?
Amy Walls (09:25):
They can reach us online at thimbleberryfinancial.com or by giving us a call at (503)-610-6510.
[Music playing]
Jon Gay (09:35):
Good stuff as always, Amy, we'll talk again in a couple weeks.
Amy Walls (09:38):
Sounds great, Jag.
Voiceover (09:39):
Securities offered through registered representatives of Cambridge Investment Research Inc, a broker dealer member of FINRA/SIPC. Advisory services through Cambridge Investment Research Advisors, Inc., a registered investment advisor. Cambridge and Thimbleberry Financial are not affiliated.
Discussions in this show should not be construed as specific recommendations or investment advice. Always consult with your investment professional before making important investment decisions.
Securities offered through registered representatives of Cambridge Investment Research, Inc., a broker dealer, member of FINRA/SIPC. Advisory services through Cambridge Investment Research Advisors, Inc., a registered investment advisor. Cambridge and Thimbleberry Financial are not affiliated.