- Treasury bills are bonds issued by the federal government periodically at auction. These are available in denominations as low as $1,000 for periods as short as short as four weeks. The yields on these are typically very low unless the Federal Reserve has set interest rates towards historic highs. The only way that a treasury bill will default is if the federal government enters sovereign default--a highly unlikely occurrence. Otherwise, an investor can also lose money on a treasury bill if the yield paid falls below the increase in inflation during the period of the bond.
- Banks offer high-yield savings accounts and certificates of deposit at interest rates set by both market conditions and the financial needs of the individual bank. All accounts and certificates of deposit are insured for up to $100,000 by the Federal Deposit Insurance Corporation (FDIC). Even if a bank does fail, in every modern case, the deposits have been rapidly purchased by other solvent banks, meaning relatively little disruption to account holders.
- Treasury Inflation Protected Securities (TIPS) are treasury bills that are indexed to the Consumer Price Index (CPI) that measures inflation. These securities will increase in yield commensurate to changes in the officially published rate of inflation. As investments, they're even safer than treasury bills. The only catch is that you need taxes on any gains due to the inflation-indexing, making them slightly less tax-advantaged than regular treasury bills. TIPS are sold at auction similar to regular treasury bills on a periodic basis.
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