Unless something very different in the US is available to what I can get in the UK, I think this is very dangerous advice.
If I put £100 in a savings account with 4% interest, I can withdraw that £100 (plus interest) at any time.
If I buy put £100 into government bonds with 4% yield and I check back in a year's time, if bond yields have increased (say, due to increased base rate) then the "balance" I can withdraw is _less_ than £100, since the underlying bond is less valuable!
Putting money in bonds exposes you to market volatility, which banks shield you from (which is why they get to take a cut)
Edit: a money market fund appears to absorb this volatility for you by balancing their bond portfolio, but ultimately you are still relying on the fund being well managed. The failure mode here isn't the govt not paying the coupon on the bond - it's the fund not having the liquidity to pay you if you withdraw. I don't understand enough how money markets are regulated to understand the risk, whereas banks are required to have deposit insurance in UK & US.
If I put £100 in a savings account with 4% interest, I can withdraw that £100 (plus interest) at any time.
If I buy put £100 into government bonds with 4% yield and I check back in a year's time, if bond yields have increased (say, due to increased base rate) then the "balance" I can withdraw is _less_ than £100, since the underlying bond is less valuable!
Putting money in bonds exposes you to market volatility, which banks shield you from (which is why they get to take a cut)
Edit: a money market fund appears to absorb this volatility for you by balancing their bond portfolio, but ultimately you are still relying on the fund being well managed. The failure mode here isn't the govt not paying the coupon on the bond - it's the fund not having the liquidity to pay you if you withdraw. I don't understand enough how money markets are regulated to understand the risk, whereas banks are required to have deposit insurance in UK & US.