Getting ready to have a baby is an exciting time! But, it can also be financially challenging. There are many questions – and even more unknowns. How long will you take for maternity leave? How much will you need to save to continue living comfortably while on leave? And what about unexpected expenses you’re sure to experience along the way?

I have recently returned from my maternity leave, so I’ve gotten some first-hand experience with the complexity of maternity leave. As we work through my recommendations for preparing, I’ll share my own experiences and hopefully you’ll find them useful.

As you are preparing to welcome a special new member of your family, let’s make sure you feel confident about taking time away from work to care for your new baby.

Key takeaways:

What Benefits & Entitlements To Expect

What are your maternity leave work entitlements?

While the Federal Government sets out some basic maternity and parental leave entitlements, including Parental Leave Pay, the policies of employers can vary widely.  Minimise uncertainty by reviewing your own employee contract and understanding your workplace policy as soon as possible.

Paid Leave Details: Check the details of your employer’s parental leave policy. Providing paid leave is costly for businesses, as they must cover both the employee on leave and a replacement worker, not many employers offer paid leave, the ones that do are mostly big corporations or multi-national companies. On 30 June 2024, payment claims for the Dad and Partner Pay scheme closed. Dad and Partner Pay and Parental Leave Pay is now combined into one payment where partners can share some or all their Parental Leave Pay for a child born or adopted from 1 July 2023 with another parent. Clarify these details early and plan accordingly.

Flexible Working Arrangements: If your employer has detailed this in their policies, that makes things a little easier for you. Otherwise, it’s time to negotiate for flexible work options, particularly if you want to transition slowly back into the workforce.

Your Partner’s Entitlements: Investigate what leave options and benefits your partner might have from their workplace. In addition to the Government’s PPL scheme, which includes partner leave, many workplaces offer paternity or partner leave in their policies.

What are the Government Benefits for new parents

As well as the benefits or policies adopted by your employer, you might be eligible for government benefits like Parental Leave Pay. This benefit is available to birth mothers and fathers, partners who may not be biological parents, adoptive parents and their partners, or other caregivers in special circumstances. It starts from your child’s birth or adoption and lasts up to 22 weeks (110 days). Currently, the rate is $183.16 per day, or $915.80 per week before tax, which aligns with the national minimum wage and changes annually on 1 July.

Parental Leave Pay can be claimed before, during, or after any employer leave, including maternity or annual leave. To qualify, your taxable income must be below $175,788 for the year before the child’s arrival, or your combined income with your partner must be under $364,350. Additionally, you must have worked at least 1 day a week for 10 of the 13 months before the child’s birth or adoption.

These parental leave entitlements can be taken when:

• An employee gives birth
• An employee’s spouse or de factor partner gives birth
• An employee adopts a child under 16 years of age

If you don’t meet these criteria, you might qualify for the Newborn Upfront Payment or the Newborn Supplement, which boost your Family Tax Benefit.

Starting July 2024, Parental Leave Pay will increase by 2 weeks annually until it reaches 26 weeks from July 2026. Each parent will then be entitled to 4 weeks of leave on a ‘use it or lose it’ basis to promote shared caregiving. Families will also be able to take up to 4 weeks of leave concurrently for more flexibility.

The great thing about Parental Leave Pay, is that if you choose to return to work before you use all your days, you can use them on any days you’re caring for your baby and not working. Your days are held in balance for 2 years after your child’s arrival.

The Financial Costs of Having a Baby

Choosing Public or Private for the Birth

One of the major choices you’ll make is going public or private for your delivery.  A quick comparison: going public will cost $0-$1500 depending on your needs, and a private birth usually costs anywhere from $3,000 to $6,000 in medical expenses.

Opting for the public health system generally provides access to a wide range of birth options and emergency medical care. However, the drawbacks are that you might need to share a room and you won’t be able to choose a doctor or midwife throughout your care and at the birth. This lack of control means that some people prefer to go private.

The private system allows you to select your doctor and the location of your birth, but it involves more preparation and hospital bills. For example, you’ll pay individually for a private obstetrician. You can investigate this further using tools such as Medical Costs Finder. The private system also provides flexibility and control that lets you choose how you want to deliver your baby, such as c-section or water birth.

If you choose the private route, your health insurance policy must have private hospital cover that includes pregnancy and birth services at least 12 months before your baby’s due date. If you have a baby within the twelve months, you are still within the waiting period! Read the fine print to make sure you understand exactly which birth-related services (or post-birth assistance like lactation consultations) are covered.

Both public and private routes have their own out of pocket costs even before the birth. Prenatal visits, for example, can add up quickly. I spent around $250 each for private doctor visits and 12 visits quickly added up to $3,000.

Fertility Treatments

If you’re using fertility treatments prior to falling pregnant, they can also add up. For example, the costs of IVF can range from $5,000 to 12,000. Depending on your medical condition and circumstances, you may be able to fund your IVF with your superannuation, under compassionate grounds. If you have an acute or chronic mental illness, you may be eligible to withdraw your super for your IVF procedure, however the application will require a medical report from a psychiatrist and a registered medical practitioner.

I recommend seeing a financial adviser if you need to seek specialist help in starting a family. This is because the costs are unpredictable, and an adviser can help you plan ahead and reduce your financial stress.

Baby Supplies

One of the most fun experiences of preparing for your baby’s arrival is shopping for baby supplies (Parents.com has a useful list). From fitting out a nursery with change table, cot, and a mobile of cute stuffed animals, to finding the perfect pram or breast pump, this is when you get to set up the kind of environment you want your baby to experience. Here are some tips that might help:

• Start shopping around as soon as you’re past your first trimester (12 weeks). This means you can take your time finding the right bargains or researching what will meet your needs. You’ll also be able to fund some bigger purchases before you’re on a reduced income.
• Hold a baby shower with a registry. With friends and family often happy to give gifts, this helps ensure that their love and care will go towards the things you actually need, like baby clothes or nappies, while reducing your future expenses. Amazon has a baby registry called ‘baby wishlist’ where you can add items into your wishlist and share the list to people who are looking to give you newborn gifts (and tick them off when you as you receive them!). The list allows you to personalise, keep track of your registry and it also allows for group gifting where multiple people can contribute to pricier items like cribs or strollers.
• Buy bulk household consumables now, whether it is laundry detergent, toilet paper, or cereal. This can help free up household budget or spending money in the future for baby supplies.
• Don’t put it on a credit card, unless you can pay it off. With reduced household income, it will be more difficult to get personal debt under control once it starts, so pace your purchases to fit into your budget.
• Think about needs and wants. The needs of a baby are much lower than the list of wants that I had for my little girl. It’s helpful to avoid unnecessary expenses by only buying what you need at each stage – sometimes I bought things too soon that I didn’t end up using.
• Maternity clothing. Depending on how much your body changes, you might need quite a few new clothes. Thankfully, you don’t need them all at once. I recommend going for a capsule style wardrobe – based around comfort – that you can keep wearing as a new mum!

Your Expenses After Having a Baby

You’ll be on a reduced income after your baby is first born, plus you’ll be spending more on a bunch of new things. This is a bit of a financial double-whammy, so build in some preparation for unexpected costs. Research has shown that new parents usually spend around $10,000 on baby-related expenses in the first year (not counting pre-natal costs).

Things like hospital or doctor visits for any complications with yourself or medical costs for your baby can be a unexpected burden – make some space for these in your budget. My daughter had some tummy issues that we had to see the paediatrician for – this cost around $300-$500. It would be heartbreaking to see your baby struggling with tummy problems or other issues but not have the funds to seek help.

The Cost of Childcare

One of the key considerations of parenthood is the cost of childcare, especially if you both intend to return to work. Childcare expenses can be significant, particularly for families with multiple children, so it’s essential to budget for these costs in advance, particularly if you’re also dealing with a drop in income. You can also evaluate different childcare options based on your preferences and budget.

The Child Care Subsidy (CCS) can help alleviate some of these expenses. This program offers financial assistance based on income, as well as residency and immunisation requirements. Families earning up to $75,000 can receive a subsidy covering up to 90% of childcare costs, which gradually decreases to families with incomes over $250,000 receiving up to 50%. Average families with 2 children in care usually spend around 24% of their income on childcare.

Budgeting for Having A Baby

Prepare to live on less income

Successfully preparing for maternity or parental leave hinges on having a solid financial plan. Ask yourself the following questions to start with:

• Duration of Leave: How long will you take off?
• Return to Work: Will you return to work, and if so, when and to the same job?

How much you need to save may depend on your timeline to return to work. If you’re not planning on returning to work full-time or at all, that will require more long-term rejigging of your family budget.

You’ll have to do more with less. Think about your lifestyle needs and what you will adjust or maintain. Factor in your additional expenses as well as your loss of income, add in any government assistance you expect to receive, and your baby budget ready to go.

It can be more complex than it sounds, particularly if you have personal debts or a mortgage to keep up with. Please do speak to a financial planner or budget counsellor if you’re struggling or anxious about this next stage of your life.

Saving & Budgeting Tips

Here are some of my top tips for preparing your budget.

• Save as much as possible while you still have your regular income. Some people aim to adjust their budget to live on one partner’s income as much as possible, to ‘test out’ living on less.
• You might be tempted to indulge in experiences like a baby-moon before baby arrives. Totally do it – as long as you’ve built it into your planning. Limit extravagant spending and redirect those funds towards your future to avoid stress over extra costs later.
• I love the dedicated bank account we set up specifically for saving for parental leave. Our ‘baby bank’ helped us track and automatically save for things like nursery expenses or emergency funds. In the future, this bank account will be used for an education fund or nest-egg for my daughter.
• Talk to your partner or spouse about the financial decisions from the start. Whether it’s having a clear understanding of exactly what is happening with your employment, taking on some of the paid parental leave available, or being onboard with budget restrictions – it’s much easier to do it together.

Your Timeline for Maternity Leave

Transitioning back to work after maternity leave can be a mix of excitement and anxiety. After nearly a year, I’ve learned that it’s an unpredictable experience as your baby’s needs change daily. You might find yourself needing more time at home or craving social interaction or the stimulation of the office earlier than you expected.

As you shift from baby bottles to work totes, take this opportunity to do a thoughtful financial review. This can help you transition back to work more purposefully, which will support both your career goals and your well-being. Adjust your family budget and pay attention to things like:

• Increased childcare costs after returning to work.
• Potential increase in income and how that fits into your budget and future goals.
• Ongoing maternity leave entitlements or leftover ‘days’ from your PPL (paid parental leave).

Returning to Work After Maternity Leave

I believe returning to work goes beyond financial needs; your mental health and career growth are both key in this decision. Meaningful work can provide a sense of purpose, structure, and social connection, which are vital for mental well-being. It also helps keep your skills up-to-date, protecting against financial vulnerability and ensuring long-term job security.

When I’m speaking with clients who are thinking through the decision to return to work or not, the costs of childcare often arise. But even from a financial perspective, it is often worthwhile for mum to return to work. Childcare is expensive, but doesn’t always cancel out even a part time income.

If you’d prefer to stay home, that decision is equally important but simply requires different planning.  You can create a budget based on a single income and potentially reduce childcare expenses. However, please also plan for the impact to your retirement funds (you might take advantage of the spouse super contributions), as well as avoiding financial vulnerability now and in the future. I recommend speaking with a financial advisor to discuss your options – whether returning to work or not.

The Long Term Impact of Career Breaks

Women are impacted significantly by career breaks such as motherhood. This doesn’t mean that it’s not worth it, but it’s valuable to know this information so you can plan accordingly. Women, at least in 2024, usually end up with a retirement account that is at least 25% less than men. 29% of women return to full-time work by the time their child is 5 (more women choose part time work), but after returning from a career break they earn 55% less than they earned before, and this loss in earnings can last for at least 10 years.

Due in part to these issues, grey divorce, lack of employment for older women, and even financially abusive domestic situations, women over the age of 45 are the fastest growing demographic of homeless or insecurely housed people in Australia. By the time they reach 60, 34% of single women live in poverty.

There is a lot of pressure and calls for the government to support mothers better. Additional measures are on their way, but have not yet been legislated.

The career impact of motherhood isn’t a choice for women – there isn’t really any other option – and most of us would say it’s worth it. Holding our babies and raising the next generation is deeply fulfilling. However, risk awareness is the first step to protecting yourself from the financial vulnerability that the ‘motherhood penalty’ can create.

Superannuation

By law, employers aren’t required to pay super on parental leave, regardless of whether the leave is funded by the government or employer. If you don’t receive superannuation, consider these strategies:

1. Super Split: Partners can split their superannuation contributions, including voluntary contributions, to help balance out superannuation savings between them. This can be a way to support each other’s retirement savings during periods when one partner may be taking time off work.
2. Make additional contributions: If you’re not working, working part-time, or even running some side-gigs from home – continue to contribute to superannuation. It might be a small amount, but it will still make a difference for your retirement.

Some employers do have a policy to pay super during maternity leave. If this is the case, enjoy knowing your retirement funds are continuing to grow, or have options to manage it as well.

1. Temporary Pause and Resume: If you need to manage your cashflow while on leave, you can choose to pause your superannuation contributions and then resume contributions once you return to work.

When making decisions about superannuation, factor in your family planning, relationship dynamics, and available resources. It’s also important to understand the impact of your decision on your retirement – it may be more than you expect.

Protecting Yourself & Your Family

Life Insurance and Income Protection for a growing family

Life insurance can serve as a safety net to provide security for your family’s finances if you were no longer around. A life insurance policy is designed to alleviate potential financial burdens, especially if others are relying on your income.

Total & Permanent Disability Cover is also an option to consider. TPD cover helps ensure that you and your family have a source of income if long-term health issues affect your ability to return to work. If you were to face a situation of permanent disability, this insurance can provide financial resources to adapt your home or access necessary medical care or rehabilitation services. If you already hold these insurances, it’s smart to increase them prior to becoming pregnant.

Income protection insurance is a third option to consider. This comes into play if you or your partner suffer an injury or can’t return to work for a period of time (outside of planned maternity leave). This is particularly important if you are living on one income – the breadwinner should have income protection.

Trauma insurance may be one of the most important cover to consider when you’re welcoming a new member of the family. If you are suddenly diagnosed with a critical illness or a serious medical condition, trauma insurance provides a lump sum payment to help you cover treatment expenses or adjust to your lifestyle. Trauma insurance provides a crucial financial safety net, offering peace of mind by ensuring your finances won’t add to the stress of recovery.

Health Insurance

Depending on your health insurance provider, you’ll usually have to add your baby to your health cover within 2 months of their birth to avoid waiting periods. Most insurers also include a requirement to add your baby to your cover within 12 months to ensure your baby is covered from birth.  Consider doing this as soon as your baby is born, in case they need to have a stay in hospital or have complications after birth.

Changing or Making a Will or Updating Beneficiaries

Many new parents are also interested in finding out when and how they should update any estate details in relation to their new baby. It’s definitely wise to know who will care for your children if you and/or your partner were to be unable to. Include this in your will, and speak to family or godparents to ensure you have plans in place.

The other thing that you can consider is updating or amending your beneficiaries for superannuation. This can particularly help avoid issues arising inheritance in blended families.

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Everything changes when you have a baby. In between navigating your new relationship with your partner, lack of sleep, and your own new identity as a mum – the last thing that you might be thinking about is your finances. Create a financial plan for maternity as early as possible for more peace of mind. If you do need financial advice to ensure you are best prepared for these life changes, please reach out for a chat.