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Cash Alternative: 7 Short-Duration US Treasury ETFs That Beat Savings Accounts

  • Writer: Rex Armani
    Rex Armani
  • 1 day ago
  • 8 min read
Retro comic-style illustration of a confident man in a suit and tie, wearing glasses. Bright yellow background with red accents.

By a finance professional who’s spent decades building conservative, cash-sensitive portfolio sleeves. Practical, no-nonsense advice for readers who want better yield than a basic savings account without gambling their emergency fund.



Table of contents




Quick takeaway


If you’re parking short-term cash (emergency fund, near-term savings or payroll float) and want materially higher yield than a basic bank savings account, several short-duration US Treasury ETFs are legitimate alternatives in 2025.


They offer competitive 30-day SEC yields in the ~4.0%+ range while keeping interest-rate and credit risk very low, but they are not FDIC insured. Use them with a clear plan (allocation size, laddering, and rebalancing rules) to keep liquidity and safety front and center. (See issuer pages for yield snapshots: SHV, BIL, SGOV, FLOT.)



Why short-duration Treasury ETFs are getting attention in 2025


With cash yields higher than the low rates of a few years ago, investors and advisors are rethinking where to park idle dollars. Short-duration Treasury ETFs combine:


  • Treasury credit quality (backed by the U.S. government)


  • ETF trading convenience (easy to buy/sell in brokerage accounts)


  • Higher yields than legacy checking / low-yield accounts in many cases


Institutional flows and retail buyers have shifted money into ultra-short government bond funds in 2025, driven by volatility and the desire for safety plus yield. That trend shows investors view these ETFs as a pragmatic cash alternative when managed correctly.


At the same time, competitive high-yield savings accounts exist (some paying ~4.0–4.6% APY as of September 2025), so ETFs are not a slam dunk for every person, they’re an option that trades convenience and slightly higher yield for the absence of FDIC protection.



The seven ETFs I recommend (what each does + yield snapshot)


Below are practical, widely traded short-duration Treasury ETFs and one floating-rate option for interest-rate protection. I list the fund, core exposure, and a representative 30-day SEC yield (yields change, check the fund page before trading).


  1. iShares Short Treasury Bond ETF (SHV): Ultra-short Treasuries (very near-term maturities). 30-day SEC yield ~4.01%.


  2. SPDR Bloomberg 1-3 Month T-Bill ETF (BIL): Zero-coupon Treasury bills under 3 months. Yield ~4.2–4.3% (varies).


  3. iShares 0-3 Month Treasury Bond ETF (SGOV): Extremely short maturity Treasury exposure. 30-day SEC yield ~4.22%.


  4. Goldman Sachs Access Treasury 0-1 Year ETF (GBIL): Treasuries <= 1 year; attractive liquidity and steady NAV. 30-day SEC yield ~4.1%.


  5. Schwab Short-Term U.S. Treasury ETF (SCHO): 1–3 year Treasury exposure (still short-duration but longer than BIL/SGOV). 30-day SEC yield ~3.7–4.2% depending on metric.


  6. Vanguard Short-Term Treasury ETF (VGSH): Tracks 1–3 year Treasury index (low cost; slightly longer duration). Yield varies; strong liquidity.


  7. iShares Floating Rate Bond ETF (FLOT): Floating-rate Treasuries (coupon resets), very low effective duration, useful when Fed moves are uncertain. 30-day SEC yield ~4.7% (floating funds often show higher trailing yields).


Why include a floating-rate ETF? Floating-rate Treasuries (FLOT) reset coupons with short benchmark rates, so they can preserve yield if nominal rates move up, useful insurance for longer short-duration sleeves.


Quick note on yields: I quoted 30-day SEC yields and trailing metrics published by the issuers and major ETF data sites. These are the best single-figure estimates for near-term expected income, but they update daily. Always confirm on the fund factsheet before trading.



Head-to-head: Treasury ETF vs. high-yield savings vs. money market


Deciding where to park cash boils down to three priorities: safety, liquidity, and yield.


  • FDIC-insured high-yield savings account — Safety: FDIC insured up to limits; Liquidity: immediate via bank rails; Yield: top rates ~4.0–4.6% APY (as of Sept 2025) but many mainstream banks still pay much less.


  • Money market funds / money market ETFs — Safety: not FDIC insured but typically very conservative; regulated by the SEC; Liquidity: very liquid, same-day redemptions for retail funds; Yield: comparable to short Treasuries, often slightly higher for government-only money markets.


  • Short-duration Treasury ETFs — Safety: Treasuries themselves have sovereign backing, but ETF shares/investment are not FDIC insured; Liquidity: trade on exchange intraday; you get market price not direct redemption at NAV; Yield: often higher than low-rate savings and competitive with top high-yield accounts, with the advantage of taxable account access and very low credit risk. 


Bottom line: If you want guaranteed principal protection up to bank insurance limits, use FDIC products. If you want best after-tax/after-fees yield while accepting market exposure, short-duration Treasury ETFs or government money market funds are reasonable.


For many investors, a blend makes sense: keep immediate, small emergency cash in FDIC accounts and park larger short-term balances in ETFs or money market funds.



How these ETFs actually work: Short-duration, T-bill, floating-rate explained


  • T-bill ETFs (BIL, SGOV, SHV-style funds): Buy short-dated Treasury bills (zero-coupon), which mature in days to months. Because they’re near zero duration, price volatility is minimal, yields come from the discount to par.


  • Short-term Treasury ETFs (VGSH, SCHO): Hold Treasury notes with 1–3 year maturities, slightly more yield but modest duration (small price moves if rates change).


  • Floating-rate Treasury ETFs (FLOT): Hold Treasury notes with coupons that reset based on short-term rates; effective duration is near zero. They tend to track short rates closely and cushion you when rates rise.


Important operational difference vs a bank account: ETFs trade on exchanges, so if markets are stressed you sell at market price (not FDIC insured). Money market mutual funds typically allow direct redemption at NAV (often $1 per share) and are regulated to be stable. ETFs are more convenient for brokerage accounts and taxable sleeves but require an extra layer of investor discipline.



Step-by-step: How to replace (or supplement) cash with Treasury ETFs safely


Use this checklist as your standard operating procedure.


1. Decide purpose & time horizon:


  • Emergency fund (3–6 months): keep a core (enough for immediate needs) in FDIC insured accounts; consider ETFs for the excess cash you can live without for 1–30 days.


  • Near-term savings (3–24 months): Treasury ETFs can be appropriate.


2. Choose the right ETF mix (examples below):


  • Immediate liquidity + lowest volatility: BIL / SGOV / SHV.


  • Slightly higher yield and still short: GBIL / SCHO / VGSH.


  • Rate-protection sleeve: FLOT (floating rate).


3. Set allocation rules (size limits):


  • Example rule: keep $X in FDIC insured accounts to cover 30 days of expenses. Put the remainder up to Y% of your cash bucket into ETFs. (I typically recommend no more than 50–70% of an emergency reserve in ETFs unless you are very comfortable with intraday liquidity variations.)


4. Trade execution:


  • Use limit orders during market hours to avoid weird spreads. Check bid/ask, volume, and premium/discount for ETFs with NAV near $100 (some funds trade with tight spreads; others like GBIL are liquid).


5. Rebalance & monitor:


  • Recheck yields monthly or quarterly. If your allocation drifts, rebalance back to target. If a fund’s SEC yield diverges a lot from peers, investigate.


6. Tax & reporting:


  • Interest distributions from Treasury ETFs are generally taxable as ordinary income in the year they’re paid. Treasury interest is exempt from state/local tax but not federal tax — confirm with your tax advisor.


7. Exit plan:


  • Convert ETF holdings back to cash by selling into the market or transferring to a broker cash sweep. Know how long it takes to access cash post-sale (settlement windows, ACH transfer times).



Laddering example — real numbers and expected income


Below is a simple example to show the math if you split $50,000 equally across five short-duration funds (SHV, BIL, SGOV, GBIL, FLOT) to reduce single-fund concentration and smooth yield exposure.


Assumptions (representative 30-day SEC yields as of early Sept 2025):


  • SHV: 4.01%.

  • BIL: 4.33%.

  • SGOV: 4.22%.

  • GBIL: 4.11%.

  • FLOT: 4.74%.


If you allocate $10,000 to each fund, your weighted average yield is about 4.28%. On $50,000 that produces roughly $2,141 per year in income (before taxes). (I used the funds’ 30-day SEC yields published by the issuers and ETF data providers to compute the weighted figure.)


Why this matters: The same $50,000 in a national average savings account (~0.6% APY) would produce under $300/year; even top high-yield savings at ~4.2–4.6% are similar. ETFs can give similar or better yield while letting you hold everything in a brokerage account for flexible reinvestment.



Costs, tax & risks you must understand (and how to mitigate them)


Key risks:


  • No FDIC insurance: ETF shares are not bank deposits. If you need absolute guaranteed protection up to $250k, keep that money in an FDIC-insured vehicle.


  • Market price movement: Although ultra-short funds have tiny duration, their market price can fluctuate a little intra-day. If you sell during stress, you could realize a small loss.


  • Tax treatment: Treasury interest is federally taxable and typically exempt from state/local tax — good for residents of high-tax states, but still taxable federally. Confirm with a tax professional.


  • Liquidity & spreads: Some funds (esp. less popular tickers) have wider bid/ask spreads. Prefer highly liquid ETFs (BIL, SHV, big-brand funds).


How to mitigate:


  • Keep a core in FDIC accounts for immediate needs (30 days) and use ETFs for the rest.


  • Use liquid ETFs with tight spreads and big AUM.


  • Use limit orders and avoid panic selling on news days.


  • Monitor tax consequences and use tax-efficient placement (IRAs vs taxable) when appropriate.



Practical portfolio recipes (templates you can copy)


  1. Ultra-conservative (safety first): 100% FDIC insured high-yield savings for your full emergency fund.


  2. Conservative cash sleeve (my recommended for many clients): 30% FDIC guard ($1–2k for instant cash), 70% split across BIL/SGOV/SHV for slightly higher yield and liquidity.


  3. Yield-focused cash sleeve (for corporations/treasury managers): Mix GBIL + SCHO + FLOT for yield with laddered maturities and floating protection. Monitor liquidity needs closely.



FAQs


Q: Short T-bill ETF vs. money market — which is better for yield and safety?


A: Money market funds (especially Treasury-only government money markets) are highly safe and very liquid; they’re regulated to keep NAV stable. T-bill ETFs can deliver similar or slightly higher yields and trade intraday, but they’re not FDIC insured and trade at market prices.


If you need fund-style redemptions at NAV, go money market; if you want brokerage convenience and slightly different tax/placement options, consider T-bill ETFs.


Q: What is the difference between short-duration, floating-rate and T-bill ETFs?


A:


  • T-bill ETFs: hold zero-coupon bills (very short maturity). Low volatility.


  • Short-duration Treasury ETFs: hold notes with 1–3 year maturities (slightly longer duration).


  • Floating-rate Treasury ETFs: hold instruments whose coupons reset frequently to short-term rates (less sensitive to rising rates). Good hedges when policy is uncertain.


Q: How do I ladder with short-term Treasury ETFs?


A: Laddering with ETFs is different than laddering individual bonds (ETFs don’t mature). Use the effective maturity ladder approach: buy a mix of 0–3 month ETFs (BIL/SGOV), 0–1 year ETFs (GBIL), and 1–3 year ETFs (VGSH/SCHO).


Rebalance periodically and harvest distributions to the short bucket. This smooths rolling yields and reduces sensitivity to any single maturity segment.



Final checklist & next steps


  1. Decide how much must be instant FDIC-insured (30 days of expenses).


  2. Pick 2–3 ETFs from the list (I prefer BIL, SHV, and one floating-rate sleeve like FLOT for many clients).


  3. Open a brokerage account if you don’t have one; execute limit orders in normal market hours.


  4. Monitor yields monthly and rebalance every 1–3 months.


  5. Document the plan: Rules for when to move funds back to FDIC accounts (e.g., market stress or personal liquidity needs).



Final thought


Short-duration Treasury ETFs can be a useful cash alternative. They deliver competitive yields, sovereign credit quality, and brokerage flexibility. But they’re not substitutes for FDIC insurance and require a disciplined plan: decide how much liquidity you truly need, pick liquid ETFs, and stick to clear allocation and exit rules.


When used thoughtfully, a blended approach (FDIC + Treasury ETFs + a floating-rate sleeve) often gives the best balance of yield, liquidity, and safety.

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