How to Financially Prepare for Maternity Leave
Having a baby can be an inestimable joy and a lot of financial planning for today and tomorrow. With all the uncontainable excitement to prepare for nursery decor and baby names, moms-to-be tend to overlook that their future is the sheer outcome of what they are planning in the present.
While the Family and Medical Leave Act of U.S. entitles working mothers up to 12 weeks of maternity leave, there is no guarantee that it will be a paid leave. In fact, the U.S. Department of Labor revealed that only 12% of workers from the private sector get paid maternity leave. Moreover, the recent years have also seen a rise in paternity leave with more and more fathers stepping up to care for their new born in the first few weeks.
Prepare for Maternity Leave With Ease
Unfortunately, going weeks or sometimes months without a steady income, can put a lot of strain on your family’s budget. If you are also one of many parents who are worried about affording maternity leave, here’s how to plan it prudently!
Here is another article that might be of great help in planning pregnancy.
Find Out About the Coverage Your Employer Provides
Maternity leaves vary by your company and country both. Where you live and who you work for can make your leave look noticeably different than other mothers from a different country or company. However, the only way to get a true picture of your situation is by reviewing your employee benefits, policies about maternity leaves, and your employee contract.
Whether you are planning for maternity or paternity leave, the first thing you need to do is stop by your HR department to get all the information you need about parental leave policies. This information should include health insurance, partial payments for maternity leave, short-term disability, using vacation and paid time off for your leave, etc. The HR department of your company might also help you get the most of your flexible spending account (FSA). The FSA allows you to use more pre-tax dollars for future medical and childcare expenses.
Another good tip is to reach out to other women at your workplace who have used a maternity leave recently. They can help you understand the things about maternity leave that had hit them with a surprise.
Calculate the Amount You Need to Save for the Maternity Leave
When it comes to planning for maternity leave, there are various factors that determine how much you will need for all the possible expenses during these 12 weeks. But the right place to start is to determine how much it will take to replace your salary for your time off work. Next, add the cost of labor and birth to this amount. Do not forget to include all baby expenses for essentials like diapers, wipes, formula, etc.
In case you need a C-section, you have to plan for at least two months of maternity leave. If you are to receive paid leave or short-term disability after the birth, find out the amount you will receive. Now compare this amount with your monthly expenses to see how much more you need to save. These calculations might only be a rough estimation, but make sure to include all expenses to work out a baby proof budget.
Create and Build Up a Maternity Leave Fund
We live in a country where all budgeting plans and goals are focused on college, retirement and emergency funds. But we hardly ever hear as much emphasis on financially planning for maternity leave, even though it requires as much consideration and long-term planning as any other financial goals.
So, if you are clueless about how to make things work for the time off to be with your baby, there is one very important thing that can help. All you have to do is create and start building up a maternity leave fund shortly after you decide to get pregnant. The best approach to build up a maternity fund is how you would set up an emergency fund.
Next, start cutting costs on extra expenses that you don’t really need like subscriptions, new clothes, expensive dinners and date nights, etc. All of these savings can be diverted to your maternity leave fund to provide for the things your baby will need. You can also tighten up your budget and go for lesser money goals. Instead of burning through a lot of money, plan to be home-bound and go for economical options once you have your baby. During the leave you can use your maternity fund to cover your fixed expenses while you dip into your emergency funds for all others.
Upgrade Your Insurance Policy
An important part of planning for your maternity leave is to revisit your health insurance policy. First things first, contact your insurance provider and get all the information about maternity benefits.
If you are already pregnant you can’t really modify your insurance plan or switch to another one that is more comprehensive. However, if you are not pregnant yet, you have room to upgrade and make a lot of changes. Find out if you can afford a health insurance policy with a lower deductible, office visit copay and coinsurance. If you find one, remember to get it during the open enrollment season. A better policy with more coverage will give you a cushion to tackle out-of-pocket expenses of labor and delivery.
Financial planning for maternity leave is all about strategic preparation, especially in a country like ours where there isn’t a mandate on paid leave for parents-to-be. While women largely outnumber men when it comes to taking parental leave, the financial strain on your budget can be a lot in any case.
Stressful as it might be, but financial planning for maternity leave doesn’t have to be daunting. As long as you plan wisely by taking advantage of your resources and finding additional sources of income, you are setting yourself up for a smooth and trouble-free leave.
Make a game plan early on so that a few weeks off from work would not cripple your finances. Still worried about affording maternity leave? Download the Doctor Money app to take control of your budgeting goals and get more creative about tackling expenses and savings. With these tips and app, you are all set to welcome the most precious miracle in your arms!