This calculator helps you decide whether to build an emergency fund first or attack your debt first in New Zealand, by putting a dollar figure on what the fund-first approach costs you. It is one of the most common money dilemmas: you have some spare cash each month, expensive debt on one side, and no safety net on the other. Both goals matter, but they pull in opposite directions, because every dollar you put into savings is a dollar not paying down debt that is charging a high interest rate. The cost of building the fund first is the gap between your debt rate and your savings rate over the time it takes to fill the fund. You enter your spare monthly cash, your emergency fund target, your debt balance and rate, and the interest your savings would earn, and the calculator shows how many months it takes to build the fund, the extra debt interest that approach costs, the interest the fund earns, and the net cost of doing the fund first. The usual sweet spot is a small starter fund for genuine emergencies, then everything at the debt, then the full fund once the expensive debt is gone. Use this to see the trade-off in numbers. Estimate only, not financial advice.
A simplified cost-of-delay estimate. With expensive debt, a small starter fund then attacking the debt usually balances security and cost best. Estimate only.
The months to build the fund are the target divided by your spare monthly cash. Over that time, the extra debt interest is your debt balance times the debt rate for those months, the interest that keeps accruing because you are saving instead of repaying. The fund interest earned is the average fund balance, about half the target, times the savings rate for the same time. The net cost is the extra debt interest minus the fund interest earned.
Saving 800 dollars a month toward a 3,000 dollar fund takes about 4 months. Over that time a 6,000 dollar debt at 20 percent racks up about 400 dollars of interest, while the growing fund earns about 20 dollars at 4 percent, so building the fund first costs roughly 380 dollars net.
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