Term Deposits vs High-Interest Savings Accounts: Which Is Better for Your Emergency Fund?

With Sorted’s Money Month coming up, I was chatting with a few of my colleagues about the Emergency Fund Challenge I’m running through She’s Worth It. That sparked a great conversation:
“Where should you actually keep your emergency fund?”

Quick heads-up before we dive in:
📌 This is not financial advice. I’m not a financial adviser, just a woman sharing what I’ve learned through lived experience and a lot of research. This is for education and empowerment, not personalised advice. Always do what’s right for your situation, and speak to a licensed financial adviser if you’re unsure.

Now, back to the chat.

One colleague said she just uses the savings account attached to her regular bank account. Another said she’s been using term deposits.

So I asked:
“What interest rate are you getting?”

➡️ The first was earning around 1.7% in her standard savings account - less than half what a high-interest savings account (HISA) can offer.
➡️ The second was on a term deposit with an even lower rate, and her money was locked in unless she wanted to lose part of her return.

This is why these conversations matter because many of us are doing what seems “normal,” without realising we have better options.

Let’s break it down.

⚖️ Term Deposits vs High-Interest Savings Accounts: What’s the difference?

🚨 Why term deposits don’t work well for emergencies

Emergencies don’t book themselves into your calendar.

They don’t wait for your 6-month term deposit to mature.
They don’t care if you have to forfeit interest to get your own money.

That’s why term deposits are risky if they’re your only emergency fund. When your money is locked in, you’re stuck choosing between:

• Losing interest

• Taking out high-interest debt

• Or putting off an urgent expense (not ideal)

💸 Why I keep my emergency fund in a HISA

High-interest savings accounts are liquid, secure, and still earn decent returns. That means:

• You can get to your money immediately, without fees

• Your account is typically insured, so your money is safe

• You’re still earning competitive interest (often 4–5% APY right now)

• You can top it up automatically to grow it over time

And as I shared in this post, I’ve even added a delay system to reduce temptation, but the money’s still accessible within 24 hours if I really need it.

🧠 When term deposits can make sense

I’m not against term deposits entirely. They can be great if:

• You’ve already got a full emergency fund elsewhere

• You’re saving for something specific with a deadline (like a holiday or a new laptop in 6 months)

• You prefer a guaranteed fixed return and don’t want the rate to fluctuate

But for your emergency fund - the money you rely on when everything hits the fan - accessibility is the priority.

💬 Final thoughts

That conversation with my colleagues reminded me how easy it is to fall into defaults with money. We stick with the bank we’ve always used. We assume all savings accounts are equal. We don’t always know there’s a better option because no one taught us.

So here’s your friendly nudge: Check where your emergency fund lives. Check the interest rate. Make sure it’s working for you; not locking you out or dragging you down.

If you want help building (or rebuilding) your emergency fund, come join our free Emergency Fund Challenge. It's gentle, supportive, and judgment-free. Because money can feel hard, but it doesn’t have to be lonely.