Money market funds and cash: T-bills, savings and real returns

Cash, for an investor, rarely means banknotes. It means money you can reach within a day or so without its value swinging: a savings account, a money market fund, or a Treasury bill that matures in weeks. These are the safest places to hold money in dollar terms, and they are where emergency funds, house deposits and the uninvested part of most portfolios sit.

"Safe in dollar terms" is not the same as "safe." Cash loses to inflation whenever its yield is below the rise in prices, and over 2000 to 2026 that was true more often than not. The different kinds of cash also carry different protections: a bank deposit is FDIC-insured, a money market fund is not, and a T-bill is a direct loan to the US government. This guide explains how each one works, the SEC rules behind money market funds as of 2026, and what the data shows cash earned after inflation.

The four kinds of cash

The names cause real confusion. A money market deposit account is a bank deposit, and the FDIC lists it among insured products. A money market fund is an investment fund, usually held at a brokerage, and the FDIC does not insure mutual funds even when a bank sells them. A high-yield savings account is an ordinary savings deposit, typically at an online bank, that pays a higher rate; it is insured if the bank is FDIC-insured.

How money market funds work

A money market fund pools investors' money and lends it for very short periods: Treasury bills, repurchase agreements (overnight loans backed by collateral), and in some funds short-term corporate and bank debt. Because everything it owns matures soon, its value barely moves, and its yield follows short-term interest rates set largely by the Federal Reserve. When the FOMC raised the federal funds target range in September 2026 to 3.75–4.00%, money fund yields had that new level to track.

Rule 2a-7 under the Investment Company Act sets what a fund must do to call itself a money market fund: limits on maturity, credit quality, diversification and liquidity. The SEC's July 12, 2023 amendments raised the minimum share of assets that must be available within a day to 25% and within a week to 50%, and removed the power to suspend redemptions with a "gate."

The rule recognizes three main types:

• Government funds invest at least 99.5% of total assets in cash, government securities and repurchase agreements fully collateralized by them.
• Retail funds limit their owners to individuals ("natural persons") and may hold non-government debt.
• Institutional prime and tax-exempt funds serve businesses and other institutions and can buy corporate and bank debt (prime) or municipal debt (tax-exempt).

The stable $1.00 price is an accounting method the rule allows only government and retail funds, valuing holdings at amortized cost or rounding to the nearest cent. Other funds must report a floating price. A fund that can't hold $1.00 and drops below it has "broken the buck." It is rare: in September 2008 the Reserve Primary Fund, a prime fund that held Lehman Brothers debt, did it. The SEC has tightened the money fund rules several times since, most recently in 2023.

Treasury bills

A T-bill is the simplest cash instrument. TreasuryDirect sells bills with terms of 4, 6, 8, 13, 17, 26 and 52 weeks, in $100 increments. Bills pay no coupon: you buy below face value and receive the full face value at maturity. Interest is subject to federal income tax but not state or local tax.

What cash earned after inflation

The chart sets the 3-month T-bill yield, a good proxy for what money market funds earn before fees, against the rate of inflation. The lower panel is the real cash yield: the bill yield minus inflation over the prior year. Computed from the monthly data with each month compared against the same month a year earlier (the FRED CPI series has no October 2025 observation, so that month is skipped):

Three stretches stand out:

• The zero-rate years. The bill yield was below 0.25% in 108 months between November 2008 and January 2022. Cash earned almost nothing in dollars, and the real yield was negative in 132 of the 159 months from November 2008 to January 2022.
• The 2021–2022 inflation. With bill yields near zero and inflation at 8–9%, the real cash yield fell to −8.13 points in March 2022, the lowest reading since 2000.
• Positive again. From May 2023 through March 2026, bills out-yielded inflation every month. In April and May 2026, when inflation rose to 3.8% and 4.2%, the real yield briefly slipped below zero, and by September 2026 it was about +0.2 points.

Across the whole period, the real cash yield averaged −0.67 points a year. Compounding the monthly bill yield, $100 kept in 3-month bills from January 2000 grew to about $167 by September 2026 before taxes and fees, while it took about $199 to buy what $100 bought in January 2000. Cash kept its dollar value and lost purchasing power. The Inflation: what it is, how it’s measured and what it does to money guide explains how CPI is measured.

Pitfalls and limitations

• Inflation is the main risk of cash. Over long periods it has cost more than market swings would have, as the data above shows.
• Yields change fast. A money fund's yield resets within weeks of a Fed decision. A savings account rate can change at the bank's discretion. Only a T-bill or a CD locks a rate, and only until it matures.
• Insurance limits. FDIC coverage has limits by bank and ownership category; balances above them are exposed if the bank fails.
• Fees and sweeps. Brokerage "sweep" accounts may pay far less than money market funds. Check what your uninvested cash actually earns.
• Price charts mislead. BIL, an ETF of 1-to-3-month T-bills, closed at about $92 in June 2007 and $91.67 on October 28, 2026. Its price is flat by design; its return is the monthly distributions, which a price chart leaves out.

Cash compared with short bonds

For the step beyond cash, see Bonds and fixed income: how bonds work, pay and lose value and Bond duration and convexity: measuring interest-rate risk.

How Finabase does it

Finabase does not list money market funds, savings rates or CD rates. It shows the rates cash is priced from: the Treasury yields table includes the 1-month, 3-month and 6-month bill yields, and each has a symbol page, such as the 3-month Treasury yield. T-bill ETFs such as BIL have full symbol pages, where the Dividends & splits tab lists the monthly distributions that are the fund's entire return. The real-cash-yield chart on this page is ours, built from Federal Reserve and BLS data published on FRED.

Frequently asked questions

Is a money market fund FDIC-insured?

No. A money market fund is a mutual fund, and the FDIC does not insure mutual funds. A money market deposit account at a bank is a different product and is FDIC-insured up to the limit.

Can a money market fund lose money?

Yes, though it is rare. Government funds hold almost only US government debt and repos. Prime funds hold corporate and bank debt and have fallen below $1.00 a share before, most famously the Reserve Primary Fund in September 2008.

What is the difference between a government and a prime money market fund?

A government fund keeps at least 99.5% of its assets in cash, government securities and fully collateralized repos. A prime fund can also buy short-term corporate and bank debt, which usually pays a little more and carries more credit risk.

Are T-bills better than a money market fund?

They differ more in tax and convenience than in safety. T-bill interest is free of state and local tax and the rate is locked until maturity; a money market fund's income is usually reinvested in more shares and the fund can be sold any business day, but its yield moves with short-term rates.

Does cash beat inflation?

Sometimes. From January 2000 to September 2026 the 3-month T-bill yield was below the CPI inflation rate in about 62% of months, with an average shortfall of 0.67 points, though it was ahead in most months from mid-2023 onward.

Summary

Cash comes in four forms: FDIC-insured bank deposits, money market funds governed by SEC Rule 2a-7, and Treasury bills backed by the US government. Government money market funds hold at least 99.5% government assets and may keep a stable $1.00 price; institutional prime funds float their price and must charge a liquidity fee on heavy redemption days under the 2023 reforms. None of these options swings much in dollar terms, but their real return is often negative: the 3-month bill yield trailed inflation in about 62% of months since 2000 and averaged 0.67 points below it. Cash is a tool for liquidity and stability, not for growing purchasing power.