In 2025, European savers are facing a new financial landscape shaped by high inflation, shifting interest rates, and the rise of digital banking. Whether you’re looking to build an emergency fund or grow your savings, the choice often comes down to savings accounts vs. term deposits. But which is better in today’s economy?
This guide breaks down the key differences, pros and cons, and what to consider before choosing the right product for your financial goals.
1. What Is a Savings Account?
A savings account is a flexible deposit product offered by banks and credit institutions that allows you to deposit and withdraw money while earning interest.
Key Features:
- Daily access to funds
- Variable interest rates
- No or low penalties for withdrawal
- Offered by both traditional and neobanks
In Europe, popular digital banks like N26, Bunq, and Revolut offer savings features with competitive interest, especially for premium users.
2. What Is a Term Deposit?
A term deposit, also known as a fixed deposit, locks in your funds for a set period (e.g., 6, 12, or 24 months) at a fixed interest rate.
Key Features:
- Fixed interest rate for a defined term
- Higher returns than regular savings accounts
- No access to funds during the term (or penalties apply)
- Guaranteed by the EU-wide deposit protection scheme up to €100,000
Term deposits are popular in countries like Germany, Austria, and the Netherlands, especially with interest rates stabilizing post-inflation.
3. Interest Rate Trends in 2025
As of early 2025, the European Central Bank (ECB) has slightly reduced key rates after a period of tightening. This has impacted savings yields across the eurozone.
| Account Type | Avg. EU Interest Rate (2025) |
|---|---|
| Savings Account | 1.25% – 2.5% (variable) |
| Term Deposit (1Y) | 2.5% – 3.75% (fixed) |
💡 Tip: Always compare offers. Some fintech banks offer promotional rates above 4% for fixed terms.
4. Savings Account vs. Term Deposit: Comparison Table
| Feature | Savings Account | Term Deposit |
|---|---|---|
| Accessibility | Anytime | Locked for term |
| Interest Rate | Variable (lower) | Fixed (higher) |
| Flexibility | High | Low |
| Risk Level | Low | Low |
| Penalty for Withdrawal | None or minimal | High (interest loss or early closure fee) |
| Best For | Emergency fund, short-term saving | Long-term saving, rate-locking |
5. When to Choose a Savings Account
You should opt for a savings account if you:
- Need liquidity and flexibility
- Are building an emergency fund
- Expect to use the funds within 3–6 months
- Want to access your money through mobile banking apps
6. When to Choose a Term Deposit
A term deposit makes more sense if you:
- Can lock funds for 6–24 months
- Want a guaranteed return
- Are saving for a known goal (e.g., a house, tuition)
- Prefer a fixed rate over market fluctuations
7. The Hybrid Approach: Combine Both
Many savvy savers in Europe are combining the two products:
- Keep 60–70% in a savings account for flexibility
- Place 30–40% in term deposits to earn higher interest
This diversified saving strategy ensures access to funds while still benefiting from higher yields.
Conclusion
In 2025, the best option between a savings account and a term deposit depends on your personal goals, time horizon, and need for flexibility. For everyday liquidity, savings accounts still reign. But if you’re willing to lock your money, term deposits offer significantly better interest—especially in the current rate environment.
Always compare offers from both traditional banks and digital challengers to make the most of your money in Europe’s evolving financial landscape.