If you have a sizable emergency fund or are saving for a house or car, setting up a treasury bill ladder can earn a little interest while keeping your money mostly liquid. This is similar to CD Laddering, but has it?s own advantages and disadvantages.
Treasury bills (popularly called t-bills) are auctioned each Tuesday by the Federal Reserve in increments of $100. When you purchase a bill, it is at a discount depending on the current interest rate; if you purchase a $1,000 treasury bill for a 2% return you?d actually only pay $980 and when the bill matures you?d receive $1,000. Bills are sold at maturity rates of 4, 13, 26, and 52 weeks. The lower buy-in and quicker maturity rate make treasury bills a little more accessible to lower income investors; CDs usually require a $500 minimum and take 3, 6, 9, or 12 months to mature. Another convenience is that you can setup an automatic laddering system from the US Treasury website so you never have to worry about micromanaging your investment.
Financial blog My Money Blog recommends starting a t-bill ladder by setting aside $4,000 and instructing the treasury website to purchase a 4-week-term $1,000 t-bill every week. When your first t-bill matures the 5th one will immediately fund and you?ll start to notice your bank account going up a little each week.
As with CDs, T-bill ladders are a way to gain a modest return without much risk, at least currently. They?re also pretty hassle-free once your ladder is setup. As with any investments, we encourage you to speak with a trained financial planner and make an informed decision.
How to Build a Treasury Bill Ladder: A Visual Guide | My Money Blog
Article source: http://feeds.gawker.com/~r/lifehacker/full/~3/8M6GWgYOl4M/setup-a-treasury-bill-investment-ladder
Tags: diy, Hack, how-to, Life
Source: http://www.bentonpena.org/life/setup-a-treasury-bill-investment-ladder-personal-finance.html
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