Lock in savings: How term deposits can fund your Christmas gifts in 2025

Saving for Christmas can sometimes feel like a last-minute scramble, but what if you could start now and take all the stress out of gift-giving in 2025? Term deposits are a reliable, under-utilised tool that can help you save effectively and make your money work harder. While they’ve been overshadowed by savings accounts and everyday transaction accounts, term deposits offer unique advantages for goal-specific savings like your festive spending.

As we head into 2025, it’s important to consider the potential impact of falling interest rates. Experts predict that the cash rate will be cut in the coming year. Locking in a term deposit could be a smart move, as you’ll likely secure a higher rate now than those offered in a few months’ time if interest rates begin to drop.

Here’s everything you need to know about using term deposits to prepare for Christmas 2025, including why they’re a practical choice, how they compare to other accounts, and tips for maximising your returns.

Despite their reliability and guaranteed returns, term deposits remain surprisingly overlooked. Earlier this month, SECNewgate Research released its Retail Deposits report, prepared for the Australian Competition & Consumer Commission (ACCC). Findings revealed that less than one fifth of Australians have a term deposit (19%), compared to those with a transaction account (95%) and those with a savings account (79%).

Term deposits offer stability and consistency, so why are they less popular?

Their biggest drawback is the lack of liquidity – funds are locked away for lengthy periods, which can be a deterrant. While the pursuit of higher interest rates drives account choices, savings accounts often win out with short-term, variable rates, despite being less predictable.

The report suggests term deposits are oft perceived as outdated products, with many younger Australians more familiar with modern options like micro-investing apps or digital banks.

Term deposits require a more structured approach, locking away funds for a fixed period. But for long-term goals like Christmas shopping, this arrangement can be a huge advantage.

Christmas 2024 is upon us, making this an ideal moment to start planning for next year. Stashing cash early can lead to significant savings by December 2025. Term deposits offer:

1. Guaranteed returns. Unlike savings accounts, where interest rates can fluctuate, term deposits lock in a fixed rate for the term’s duration. This means you’ll know exactly how much you’ll have when the term matures, making it easier to plan your Christmas budget.
2. Discipline. Since you typically can’t access your funds without incurring penalties, term deposits encourage you to stick to your savings plan. This can be particularly helpful if you’re prone to dipping into your savings.
3. Safe and secure. The ACCC’s report highlights that safety of funds is a top priority for Aussies when choosing a term deposit. Funds in term deposits with authorised deposit-taking institutions (ADIs) are protected up to $250,000 by the Australian Government’s Financial Claims Scheme.
4. Competitive rates. With many providers offering competitive interest rates for durations as short as one month, term deposits can help your Christmas savings grow faster than a standard transaction account.

To make the most of your Christmas fund, follow these steps to choose the right term deposit that suits your savings goals and offers the best returns.

1. Pick the most suitable term length

Choosing the right term length is key to maximising your savings, depending when you start.

• For Christmas 2025, consider a 12-month term deposit if you’re starting early or a 6-month or 9-month term if you need to build some savings first.
• The most popular term deposit lengths are 12–24 months (30%) and 6–12 months (26%), according to the research report.

2. Compare interest rates

The report found that more than half (52%) of term deposit holders choose a ‘Big 4’ bank simply because they’re already customers. Don’t settle for the first rate you see. While the ‘Big 4’ banks may provide convenience, smaller institutions often offer more competitive rates.

Comparison websites, like Mozo, are a great place to start your search – providing up-to-date rates and relevant information like minimum deposit amounts, break fees and frequency of interest payments.

3. Consider negotiation

Almost half (49%) of term deposit holders have successfully negotiated their interest rates. Visit a branch or call your bank to see if you can secure a better deal. It's always worth exploring your options, as even a small increase in interest can make a significant difference over time.

4. Check fees and accessibility

While term deposits typically have no ongoing fees, always read the fine print. Ensure the terms align with your savings timeline to avoid early withdrawal penalties.

Pairing a term deposit with other savings strategies can make your Christmas fund more robust:

• Combine with a high-interest savings account. Use a savings account to collect smaller, regular deposits throughout the year, then roll the lump sum into a term deposit.
• Plan your maturity date wisely. Most providers aren't flexible with their terms. Ensure the term deposit matures in time for your Christmas shopping.
• Shop smarter. Once your term deposit matures, use the funds strategically. Make a list, budget properly and take advantage of sales like Black Friday, Cyber Monday or end-of-year clearances to stretch your dollars further.

The research report found that less than one in five (18%) Australians have searched for a new term deposit in the last three years. By sticking with familiar banks, savers often miss out on better rates and terms. Whether you prioritise competitive rates, fee-free accounts, or flexible terms, comparing providers is key to maximising your returns.

For example, online banks and credit unions often outshine the ‘Big 4’ when it comes to standard interest rates. Don’t hesitate to explore lesser-known options – they might offer the perfect term deposit to meet your Christmas gift-giving goals.

Term deposits might not be as popular as other account types, but they’re a powerful tool for disciplined, goal-oriented saving. With guaranteed returns, a fixed structure, and the safety of government-backed funds, they’re an excellent choice for planning your festive finances.

Finding the right term deposit now may help make Christmas 2025 a little less stressful.