maternity leave budgeting

Their heads smell great. Their smiles can light up a room. Their shoes are impossibly small and utterly useless, yet so incredibly cute. That’s right. We’re talking about babies.

If you’re getting ready to welcome a new baby into your house, or think that season of your life may be starting soon, there are plenty of things to consider and lots of things to plan for. And one of the first things you may want to plan is maternity leave. A little bit of budgeting will go a long way to keep you a little less stressed when your little bundle of joy arrives.

Get to Know Your Company’s Maternity Leave Policies

If you’re pregnant, one of the first conversations you need to have is with the HR person at your company. Most companies are going to have well-documented maternity leave policies in place, so ask your HR person to provide a copy to you. But don’t be afraid to schedule a meeting with him or her as well. Maternity leave policies can be confusing if you’ve never had to look at one before. And if this is your first baby, chances are you haven’t.

With no federally-mandated policy in place, companies can offer a wide variety of maternity leave options. Some companies will offer four months or more of full pay, while others offer six weeks partial pay with the ability to take additional time off unpaid. I’ve also seen some companies that have provisions that a certain number of PTO days have to be used before leave kicks in. You’ll want to ask your work how they treat vacation and sick days when it comes to maternity leave.

A lot of companies use short term disability insurance to help subsidize the cost of maternity leave. That means even if you get paid the same amount throughout your leave, when and how you get paid might be drastically different. You might get a lump sum payout from disability, but then your regularly scheduled checks at a reduced amount. The more you know now, the easier it’s going to be to seamlessly cover your expenses while on leave.

Benefits

The other thing you may need to think about is your benefits. If your company doesn’t provide maternity leave, but you take the time off, ask how that may affect your benefits.

If you aren’t getting a paycheck, and therefore not having benefit withdrawals from your paycheck, you may be expected to pay for your benefits when you return. You definitely want to make sure your health coverage stays intact. Having a new baby means you’re going to be at the doctor’s office a lot more for routine checkups during those first few months. Make sure your health coverage is uninterrupted while on leave.

Budgeting for Paternity Leave

The other thing that is becoming more common in company policy are provisions for paternity leave. If your spouse’s company offers paternity leave, again, it could vary anywhere from one week to six months of paid time off. Or they could offer no pay at all.

If your spouse wants to take extended time off to stay home with the new baby, you’ll need to plan ahead if that extra time means a deduction in paychecks or maxing out PTO days.

Start a Maternity Savings Fund Now

If you are facing a scenario where you can expect a decrease in pay – either yours or your spouses – start building a maternity savings fund as quickly as possible. The time to figure out your finances is not going to be while you’re also figuring out how to be a parent and keep a baby alive. Having a dedicated savings fund will allow you to enjoy those early days without having to worry about your finances.

Having a maternity savings plan in place will also help when it comes to unexpected baby-related expenses. You’re likely not going to be flush with cash during this big life transition, so having a cushion will create some breathing room.

We’ve provided a handy guide for budgeting for a new baby here to help you think about all of the baby-related expenses you may need. But there are plenty of things you don’t think you’ll need that will become necessities once you have a baby in your house. Let’s say you plan on having your baby sleep in a bassinet in your room for the first three months, but quickly realize hearing every coo throughout the night is not great for your sleeping schedule. If so, you might need to buy a crib now that you may have planned on delaying for a few months.

Maternity Leave Checklist

So many things about parenthood and preparing for a baby seem incredibly daunting at first. We want this life transition to go smoothly for you, so based on what we’ve already discussed, here are some questions you need to ask yourself, your partner and your employer to help you financially prepare for maternity leave:

  • Does your company offer maternity leave coverage?
    • If yes, how many weeks does it cover? Will it cover your full pay? How and when will you be paid (weekly, monthly, lump sum) while on leave?
    • If not, how much time will your employer allow you to take off? How much time can you afford to take off?
  • Does your spouse’s company offer paternity or similar family leave policy?
    • If so, how many days/weeks does it cover? Will it cover your spouse’s full pay? How and when will your spouse be paid (weekly, monthly, lump sum) while on leave?
  • Will your benefits remain intact while on maternity leave? Will you have to pay for any portion of your benefits while on leave?
  • Do you need to start a maternity leave savings fund? If so, how much do you need to save between now and when your leave starts? How much can you realistically save during that time?

We hope this guide was helpful. Parenthood is a wild ride, and nothing will ever fully prepare you for it. But if you think ahead and ask some important questions now, the budgeting part of those first few months will feel a whole lot easier.

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For more tips, tricks and info about money and kids, see our other Carmen’s Corner posts here. Or follow the Fiscal Fitness Facebook page for daily money encouragement and budgeting inspiration.