Best Alternatives to a Savings Account in 2025
See how your cash grows in different savings alternatives versus inflation. Based on Australian market rates as of 2025.
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Investment period:
Interest rate:
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Inflation-adjusted value (4.5% p.a.):
Everyone wants their cash to grow faster than the bank’s tiny interest rate, especially when inflation is eating away at buying power. If you’ve ever wondered alternatives to savings account that still keep your money safe, you’re in the right spot. This guide walks through the most popular options available in Australia, compares their key traits, and helps you decide which one fits your lifestyle.
When most Australians think of a Savings account is a low‑risk deposit product offered by banks that earns a modest interest rate on everyday balances, they assume it’s the safest place for idle cash. In reality, a standard savings account in 2025 typically pays 0.5‑1% p.a., which often lags behind inflation (currently around 4.5% in Australia). The key advantages are easy access, no lock‑in period, and full protection under the Australian Government’s Financial Claims Scheme. However, the low return means your real purchasing power can shrink over time.
If you keep $10,000 in a regular savings account and earn 0.8% interest, you’ll have $10,080 after a year. Meanwhile, inflation at 4.5% reduces the buying power of that $10,080 to roughly $9,640 in today’s dollars. That’s a net loss of $360. The math gets worse with larger balances. To preserve or grow wealth, you need a vehicle that either pays a higher nominal rate, outruns inflation, or provides additional benefits such as tax advantages or better liquidity.
High‑yield savings accounts are offered by a handful of challenger banks and credit unions that can afford to pay 2‑3% p.a. because they operate with lower overhead. For example, Ubank Savings is an online‑only bank that currently offers 2.25% interest on balances over $5,000. The catch? You usually need a minimum balance to qualify, and the rate can be promotional, dropping after a set period. Still, they remain fully covered by the Financial Claims Scheme and provide instant online access.
A money market account blends the safety of a traditional savings account with a slightly higher yield, often ranging from 1.5‑2.5% p.a. in Australia. Institutions such as AMP Money Market is a short‑term instrument that invests in high‑quality government and corporate securities while maintaining liquidity. You’re usually limited to six withdrawals per month, mirroring the “transaction limit” rule in the U.S., but Australian banks apply similar caps based on product terms. Money market accounts are covered by the Financial Claims Scheme, making them a low‑risk choice.
Term deposits lock your money for a predetermined period-usually 1, 3, 6, or 12 months, but longer terms up to 5 years are common. In 2025, a 12‑month term deposit at a major bank can yield 3.5‑4% p.a., while a 3‑year fixed term at a credit union may push 4.5‑5%.
Key features:
Term deposits are ideal if you have cash you can set aside without needing immediate access.
For investors comfortable with a longer horizon, Australian government bonds provide a low‑risk, inflation‑linked option. A 5‑year bond issued in 2025 carries a yield of about 3.2% p.a., while a 10‑year bond sits around 3.5%.
Benefits include:
You can buy bonds directly through the Australian Securities Exchange (ASX) broker platform or via a managed fund that aggregates many bonds for easier access.
Many discount brokerages, such as SelfWealth Cash Account is a cash‑only account that sweeps idle funds into short‑term money‑market funds, delivering yields of 2‑2.5% p.a., offer a “cash‑management” feature. Your cash sits in an account that automatically invests in high‑quality money‑market securities while remaining fully liquid. You can pull funds instantly to trade stocks or withdraw to your bank.
Things to watch:
Exchange‑traded funds (ETFs) aren’t just for equities. Cash‑equivalent ETFs, such as the BetaShares Australian High‑Interest Cash ETF is an ETF that invests in short‑term government and corporate paper, delivering an average yield of about 2.8% p.a., offer a simple way to earn higher returns while maintaining the ability to buy or sell shares on the ASX at any time.
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Cons:
Robo‑advisor platforms like Spaceship Cash Portfolio is a fully automated portfolio that parks client cash in high‑yield savings and short‑term bond funds, targeting a 2.5% return after fees. They handle the rebalancing and automatically move money to the highest‑yielding product available.
This is a set‑and‑forget option for people who don’t want to chase rates themselves.
Platforms such as RateSetter is a P2P marketplace where investors fund short‑term personal loans, often earning 5‑7% p.a. after default protection can provide higher yields. However, they come with higher risk: borrower defaults, platform insolvency, and less regulatory protection than bank deposits.
Only allocate a small portion of your emergency cash to P2P, and treat it as a higher‑risk investment rather than a pure savings replacement.
| Product | Typical Yield (p.a.) | Liquidity | Risk Level | Minimum Balance | Tax Treatment |
|---|---|---|---|---|---|
| High‑Yield Savings | 2.0‑3.0% | Instant | Very Low (FCS covered) | $5,000 | Interest taxed as ordinary income |
| Money Market Account | 1.5‑2.5% | Instant (6‑withdrawal limit) | Very Low (FCS covered) | $1,000 | Interest taxed as ordinary income |
| Term Deposit (12‑month) | 3.5‑4.0% | Locked for term (early penalty) | Very Low (FCS covered) | $1,000 | Interest taxed as ordinary income |
| Australian Gov’t Bond (5‑yr) | 3.2% | Low (sell before maturity incurs price risk) | Low (government backed) | $5,000 | Interest taxed as ordinary income |
| Cash‑Management Account | 2.0‑2.5% | Instant | Low (underlying money‑market fund) | $0‑$1,000 | Interest taxed as ordinary income |
| Cash‑ETF | 2.8‑3.0% | Instant (market hours) | Low‑Medium (short‑term instrument risk) | 1 share (≈$25) | Dividends taxed; capital gains on sale |
| Robo‑Advisor Cash Portfolio | 2.5‑3.0% net of fees | Instant (via platform) | Low (managed mix) | $500 | Interest taxed as ordinary income |
| P2P Short‑Term Lending | 5‑7% | Varies (loan term 12‑24 months) | Medium‑High (default risk) | $100 | Interest taxed as ordinary income; potential loss of capital |
There’s no one‑size‑fits‑all answer. Consider these questions before moving money:
Once you answer these, match the product attributes from the table above. A common “layered” approach works well: keep a few hundred dollars in a regular savings account for emergencies, park the bulk in a 12‑month term deposit, and allocate a modest slice to a cash‑ETF or high‑yield savings for flexibility.
Remember to keep a tiny cushion in your everyday account to cover any unexpected fees.
Yes. Diversifying across high‑yield savings, a term deposit, and a cash‑ETF can give you a mix of liquidity, guaranteed returns, and slightly higher yields. Just monitor the total amount you keep in non‑FCS‑protected products.
Most high‑yield savings rates are promotional and can change with notice. Fixed‑term deposits lock the rate for the term, so they are truly guaranteed unless you break the contract.
No. You can purchase bonds directly through an ASX‑registered broker or via a low‑cost bond fund. An adviser might help with portfolio allocation, but it’s not required.
Cash‑ETF distributions are generally treated as interest income, so they are taxed at your marginal rate. However, if you sell shares for a profit, you may also incur capital gains tax.
A fully insured savings account or a term deposit (up to the $250,000 FCS limit) offers the highest level of protection. Pair it with a short‑term bond or government bond if you need a little more yield but still want near‑risk‑free status.
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