Maternity Leave: Your Expert Guide to Preparing Financially

Financial Planning

Preparing for maternity or parental leave can be an exciting time as you start to make way for the new addition to your family. But it can also be challenging financially.

Between considering how long your maternity leave will last for, how much you’ll need saved to continue to live comfortably while on leave and what unexpected expenses may come your way once your new bundle of joy enters your life, it can be hard to know where to start.

As your team of dedicated financial experts, we decided to break down maternity and parental leave entitlements in Australia and share a few ways that you can prepare financially for your period of leave.

This guide to preparing for maternity and parental leave covers:

  • A breakdown of the standard maternity leave entitlements in Australia
  • How much you’ll need saved for your maternity leave period
  • Tips for preparing financially for your maternity leave

Or if you’d like to find out more about how you can prepare for maternity or parental leave in relation to your specific financial circumstances and needs, our team of financial advisors are here to help.

What are the standard maternity leave entitlements in Australia?

In Australia, primarily maternity and parental leave entitlements are governed by regulations from the Federal Government, though State Governments and individual employer policies may also have an effect depending on your particular financial circumstances.

The Federal Government mandates that employees are entitled to 52 weeks, or 1 year’s worth, of unpaid parental leave. Employees may also request an extra 52 weeks of leave, though there is no obligation for employers to grant this request.

Additionally, employees who are taking parental leave in the case of adopting a child are entitled to an extra two days of unpaid pre-adoption leave to ensure they’re able to attend any relevant interviews or examinations.

Some of the parental leave entitlements the Federal Government mandates include:

  • Maternity leave
  • Paternity and partner leave
  • Adoption leave
  • Special maternity leave, which is unpaid leave available to those with a pregnancy-related illness or whose pregnancy ends unexpectedly without the birth of a living child
  • A safe job or “no safe job” leave, which ensures those who are pregnant have access to safe work prior to the beginning of their maternity leave period
  • The right to return to your old job

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

It should be noted that while employers in Australia must stick to both Federal and State Government regulations under law, individual employers may also have their own policies in regard to maternity and parental leave that you should make yourself aware of. Depending on your employer and your job type, these policies can vary widely and some employers may end up being much more generous than others when it comes to maternity and parental leave.

Generally speaking, in order to access the entitlements put in force by the government, permanent full-time and part-time must have worked for their employers for at least 12 months before:

  • The date or expected of birth, if the employee is the one who is pregnant
  • The date of adoption
  • The period of leave starts if you’re taking leave after your partner has cared for your child or taken parental leave

For pregnant employees, you may commence your maternity leave up to six weeks before your due date or from week 34 of your pregnancy. For those adopting, or who is the partner of someone giving birth, your parental leave may begin on the day of the birth or adoption.

And would you believe us if we said this was just the tip of the iceberg?

Just like many aspects of your financial world, figuring out what maternity or parental leave you’re entitled to can be more complicated than you’d first expect. That’s why seeking the advice of your financial advisor is so important, as they’ll be able to work with you to understand the entitlements you may be able to access based on your particular financial circumstances.

However, you may have noticed a trend in the entitlements above:the majority of the Federal and State Government mandated maternity and parental leave entitlements are unpaid.

This means that preparing yourself financially for your maternity or parental leave becomes essential to ensure that you’re able to continue on your journey to achieving financial success and security with a minimal amount of disruption.

How much will I need to cover maternity leave?

The amount of cash you will need access to cover your maternity or parental leave period will depend on your particular financial circumstances, your income and expenses and your financial goals.

Becoming a parent and entering your maternity or parental leave period can be an exciting time, but it can also be filled with a number of uncertainties as you enter a new phase of your life both personally and financially.

Just a few of the things you may need to consider when preparing financially for maternity or parental leave include:

  • If you currently have a mortgage, the cost of your repayments over the length of your leave
  • Increased grocery costs with the addition of a new member of your family
  • Any potential future childcare costs
  • Medical costs, both once-off and any ongoings

And that’s just the beginning.

If you’re interested in learning more about how you in particular can prepare financially for your maternity or parental leave period, our team of expert financial advisors is here to help. All you have to do is get in touch.

Based on our experience helping those just like you prepare for their maternity or parental leave periods, read on for how to financially prepare for maternity and parental leave.

How to Financially Prepare for Maternity Leave

1.  Check what you’re personally entitled to

We mentioned it before, but while the Federal Government has mandated a number of unpaid – and one paid, which is known as the Parental Leave Pay – maternity and parental leave entitlements, what you’re personally entitled to will depend largely on the policies of your employer.

That’s why, if you’re planning for a growing family, it’s important to find out the policies of your particular employer ahead of time. A few things to consider when inquiring about the entitlements available to you include:

  • The availability of any paid maternity or parental leave and, if available, how long this period would last for
  • The possibility of any flexible working arrangements in the lead up to your period of maternity or parental leave, which may enable you to put away a little bit extra
  • The entitlements your partner may have and how this could factor into your overall financial plan during your period of parental or maternity leave

Your, or your partner’s, entitlements may also be different depending on whether you work for a private company or government institution, as generally speaking government workers may have more generous entitlements than those who work for a private enterprise.

2. Create a plan

It may sound obvious, but the secret to successfully financially preparing for a period of maternity or parental leave will depend largely on the plan you develop to guide you through.
By creating a financial plan for this period (and sticking to it!), you’ll ensure not only that you have a point-of-reference to fall back on when life gets complicated but also that you’ve thought through and prepared for many of the things that catch new parents off guard.

A few things you should consider when preparing a financial plan for your maternity or parental leave period include:

  • How long you intend to take maternity or parental leave for
  • Whether or not you’ll be returning to work or, if so, at what point would you like to do so
  • Similarly, whether or not you’d like to return to the same job
  • How much money you’ll need in reserve to enjoy your current lifestyle or whether you may have to reduce your lifestyle
  • Amending your personal insurances or will to secure the financial future of your growing family
  • Any extra costs that may pop up, including living and medical costs with an extra member in the family

By deciding on these aspects of your financial world before commencing your maternity or parental leave, you’ll be able to worry less about your financial path moving forward and focus more on enjoying your time with the new member of your family.

Your financial advisor can also help you, not only in developing your maternity or parental leave plan but also as you move forward into the next chapter in your life.

3. Save, save, save

For many of you preparing to take maternity or paternity leave, it’s likely that the entirety of this period will be unpaid. With this in mind, saving as much as you can while you do have access to your regular income is essential to ensuring you’re able to enjoy a maternity and parental leave period free from the stress of worrying about money.

As you approach an exciting but turbulent time in your life, you may be tempted to live life to the fullest in preparation for a period of hunkering down once your new little one has arrived. While it is important to enjoy your life, we’d recommend keeping your extravagances to a minimum and using that money instead to prepare for your future.

One way you could save a little bit extra in the lead-up to your maternity or parental leave is by approaching your employer to see if there’s an option for you or your partner to work a little overtime or pick up an extra shift. You could also consider foregoing one of your rostered days off, if possible, to earn just that little bit extra.

Another way could be by starting or picking back up a side business you could complete around your regular work commitments. You could also finally get around to selling those unnecessary things around your home you’ve been meaning to get rid of, such as clothes or extra furniture.

Once you’ve freed up extra cash flow, you could also consider setting up a separate bank account dedicated to saving just for your maternity or parental leave period. By having a separate account you’ll be able to not only easily see just how much you have saved but you’ll also be able to set up automatic money transfers that will ensure this account continues to grow.

Finally, the simplest way to save is by cutting all unnecessary expenses. Your financial advisor will be able to work with you to review your current budget and figure out whether there’s anything to cut down on.

You could also check out this guide to money saving and budgeting, which will provide you with more in-depth advice on how to spend less and save more.

4. Familiarise yourself with the government benefits you can access

While your employer may not offer paid maternity or paternity leave entitlement, there are a number of government benefits you may be able to access to offset the financial strain potentially caused by an unpaid leave period.

The main government payment available to new parents is Parental Leave Pay, which can be accessed by the birth mother of a newborn child, the adoptive parent of a child or another person caring for a child under exceptional circumstances. Parental Leave Pay goes into effect from the date of your child’s birth or adoption until the end of your paid parental leave period, which can continue for up to 18 weeks.

However, there are a number of strict criteria governing whether or not you’re eligible to receive Parental Leave Pay. For example, you can’t have an individual adjusted taxable income of over $150,000 in the financial year before the birth or adoption of your child or the date you lodge your claim. You’ll also need to have worked a minimum of 1 day a week in 10 of the 13 months before the birth or adoption of your child. For more information about the criteria for gaining access to Parental Leave Pay, visit the Services Australia site.

But, even if you aren’t eligible for Parental Leave Pay, you may still be able to access either the Newborn Upfront Payment, a lump sum payment, or the Newborn Supplement, which is an increase to your Family Tax Benefit payment.

5. Decide whether you want to go public or private for the birth

It’s no secret that giving birth can be an often challenging and emotional time for both you and your partner. That’s why ensuring either yourself, if you are the one giving birth, or your partner are comfortable with what to expect medically when it comes time to usher your new little one into the world.

And one of the biggest decisions in regards to this is whether you’d prefer to use the public health system or the private system for the birth itself.
Both have benefits and downsides depending on your particular financial situation. For example, using the public system will give you access to a greater range of birth options and access to emergency doctors if needed, however it is likely you’ll have to share a room after the birth and you may not always see the same doctor or midwife. The private system, on the other hand, gives you the option to choose your doctor and where you give birth but does require a little bit more preparation.

If you do decide you’d like to use the private system for your birth, it is essential that you upgrade to private hospital cover that includes pregnancy and birth-related services at least 12 months before the birth of your baby to be able to claim for the services listed on your policy. It is also important to know exactly which birth-related services your policy gives you access to, as not every policy may cover everything you’d like.

6. Consider the cost of childcare

One of the biggest expenses you may need to consider when preparing for your maternity or parental leave period is the cost of childcare if you do decide to return to work.

Paid childcare can put a large strain on the budget, especially if you have more than one child. That’s why it’s important to plan ahead and accommodate for this expense, especially since you’ll likely be approaching paying for it after a period of not having access to your regular income.

Luckily, there are government benefits available to help you offset the cost of paid childcare, such as the Child Care Subsidy package. This subsidy is available to anyone caring for a child aged 13 or younger who’s not attending secondary school, who is responsible for paying childcare fees and who meets certain residency and immunisation requirements.

The Child Care Subsidy is designed to ease the cost of childcare as the government pays for a certain portion of your child care expenses based on your income. For example, if your family income is between $0 to $68,163, the government will subsidise 85% of your childcare costs. If, however, your family income falls between $173,163 to below $252,453, the amount the government will subsidise falls to 50%.

This table, from the Australian Government Services, breaks down the percentage of childcare costs the government will subsidise further:

Since the government only subsidises a portion of your childcare expenses, we’d recommend factoring in preparing for how much you’ll likely need to pay the out-of-pocket costs in your maternity or parental leave plan.

You may also choose to consider whether returning back to work is the right option for your particular financial needs and circumstances. For example: if your returning to work pushes your family’s taxable income into a higher bracket, in turn lowering the amount of childcare subsidy you’ll receive from the government, it may result in your childcare costs outweighing your income. This is especially true for those with more than one child in childcare, in which case costs can double or even triple.

It can get complicated!

7. Consider negotiating with your employer to make up the difference

We mentioned it before but there are ways to prepare yourself financially for a maternity or parental leave period that don’t involve becoming a hermit or praying for a last-minute pay rise.

One of these is by negotiating with your employer other ways you could relieve tension in your budget through benefits aside from your pay.

Just a few ways you could negotiate with your employer to save a little money could include:

  • If you use your personal phone for work, asking whether your employer would consider paying for your phone package
  • Limiting the use of your personal car and using a company car if available to cut down on the costs of fuel and maintenance
  • Working an extra day or picking up extra hours when you can in the lead up to your maternity or parental leave period
  • Consider setting up a salary sacrificing scheme that would lower your taxable income while ensuring you’re continuing to work towards a brighter financial future

Gaining even one of these benefits would enable you to ensure a steady cash flow while you put away a little bit extra to prepare for your maternity or parental leave period. And when it comes to saving, a little can go a long way – especially as you enter a period of financial and emotional uncertainty.

If you’d like help or would like to talk to someone about preparing for maternity leave, please get in touch. Our team of expert financial advisors can help you understand your current financial situation and create a maternity leave plan for you and your family.

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