Debt vs Invest Calculator NZ
This calculator helps you work through a common money question in New Zealand: when you have spare cash, are you better off putting it towards debt or into an investment. Repaying debt gives a guaranteed, risk-free return equal to whatever interest rate you are being charged, while investing offers a return that could be higher but is never certain. To compare the two fairly, enter the amount of spare cash you have, the interest rate on the debt you would repay, the after-tax return you expect from investing instead, and the number of years to look ahead. The calculator compounds both paths and returns a clear verdict on which is the better use of the cash, alongside the actual interest you would save by repaying the debt and the actual growth you would get by investing instead. Because repaying debt carries no risk while investing does, treat a close result as a point in favour of clearing the debt rather than a toss-up. This is useful for weighing high-interest debt like credit cards against contributions to KiwiSaver, or for deciding how hard to attack a mortgage versus building a share portfolio. The figures are an indicative comparison based on the rates and timeframe you enter, not a forecast or financial advice, so revisit them if your circumstances change.
Repaying debt is a guaranteed, risk-free return equal to the debt rate; investing is uncertain. If the figures are close, repaying debt usually wins because it carries no risk. Keep an emergency buffer either way. Estimate only, not financial advice.
How it works
The calculator compounds the interest you would save by repaying the debt over the period, against the growth you would get by investing the same amount at your after-tax return. The higher figure is the better use of the cash on the numbers. Crucially, repaying debt is guaranteed and risk-free, so when the two are close, paying down debt is usually the smarter choice.
Worked example
On $10,000, repaying a 12% debt saves about $7,600 of interest over 5 years, while investing at 6% grows by about $3,400. Here repaying the debt wins clearly, and with no risk. For a low 5% mortgage versus a 7% investment, the gap narrows and investing might edge ahead, with risk.
Related calculators
- Debt Snowball Calculator: clear debt faster.
- Mortgage vs Invest Calculator: mortgage version.
- Credit Card Interest Calculator: card interest.
- Compound Interest Calculator: investment growth.
- The Order of Investing: the background to this calculation.