The weeks and months leading up to your maternity leave are as exciting as they are terrifying. You have spent many months preparing for the changes to take place in your life and your home. Now, it is time to prepare financially for the challenge of extended time off work for maternity leave.
Understanding Your Health and Maternity Benefits
For the most part, companies only provide brief maternity leave periods. With an effective plan, you can have plenty of time to enjoy your newborn before returning to work. However, it would be best if you began by understanding the health and maternity benefits your employer provides.
Work with the HR representative in your company to understand the health insurance and maternity benefit your organization provides. Specific questions you want to ask include:
- How much of your health insurance deductible have you already paid for the year and how much remains?
- Are you responsible for co-payments or coinsurance? If so, how much?
- What is your maximum out-of-pocket for your specific insurance policy?
- Will you be responsible for additional health insurance while on leave?
- Does your organization offer some paid maternity leave? If so, how much? The U.S. does not require businesses to offer paid maternity leave through the Family and Medical Leave Act (FMLA), but it does require most businesses to offer up to 12 weeks of unpaid leave after having or adopting a baby. Some organizations do offer paid maternity leave, though.
- How many vacation days have you accumulated? Your company may require you to use your vacation days and PTO before using your FMLA benefits, which allows you to get paid for some of that time.
- Do you have a short-term disability plan through your company? If so, does it provide for income during maternity leave, and how much?
You should note that some companies require employees to repay health insurance payments they covered during your leave if you do not return to work.
The better understanding you have of your income and obligations during this exciting time, the better prepared you can be for creating a savings plan and budget for the time leading up to the big day and after.
Saving and Budgeting
Hopefully, you begin this process early in your pregnancy and have a few months to prepare for your upcoming maternity leave. The sooner you start making preparations and saving money, the better it will be for your budget after the baby is born. Unfortunately, this all comes at a time when many expenses are cranking up as you prepare your home for your little one's arrival.
- Start with a list. Make a list of your current income and current expenses. Then look for ways to trim the fat, massively, so you can put some money into savings while, at the same time, investing in the necessities for your home and new baby. Also create a budget that addresses reduced income after the baby is born along with new expenses (diapers, formula (if needed), supplies, and equipment).
- Be wise with your “nesting” activities. While you're decluttering your home and making room for baby, consider selling items on eBay, consignment stores, or having a giant yard sale rather than throwing them away or giving them away. That will help pad your savings.
- Shop smart. It is tempting to hit all the baby boutiques for adorable outfits your newborn can wear from day one. However, many of these items, especially newborn sizes, will only be worn once or twice before your baby outgrows them. Find consignment shops instead and buy clothing in a variety of sizes (newborn to 24 months). Many of these items have only been worn a few times and will be a fraction of the cost of buying them new.
- Cook ahead and freeze foods. Doing this now, while you have your full income, will help stretch your money further while you are on leave and getting to know your baby.
- Consider starting a side hustle. While you may not be ready to return to work, now might be a great time to begin a blog, start a crafting side hustle, or exploring other entrepreneurial interests. It brings in income and allows you to take advantage of downtime while your baby is sleeping while keeping your little one close.
The key is to reduce expenses while making sure you have the necessities in life covered, without going into unnecessary debt. Knowing your finances are in the right place will make this vital bonding time with your baby more enjoyable and relaxing.
Creating a Plan that Will See You Through Your Leave
Starting early and creating a plan that carries you through your maternity leave allows you the ability to enjoy your full maternity leave without worrying about keeping the lights on or going into debt to do so.