Maternity Leave: Your Expert Guide to Preparing Financially

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.

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.

At My Wealth Solutions, we aim to be your financial partners for life. That means we’re always available to provide you with expert financial guidance and support whenever and wherever you need it.

Interested in learning more about how our team of financial advisors can help you prepare for maternity or parental leave?

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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.

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.

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.

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.

Sound complicated?

Don’t worry, your financial advisor will be able to work with you to assess your options when it comes to whether childcare is the right option for you and your family and plan a path moving forward suited to your unique financial circumstances and goals.

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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.

Want to know more about how you can prepare for maternity leave?

Our team of expert financial advisors can help you understand your current financial situation and provide you with a maternity leave plan that considers every aspect of your financial world.

All you have to do to get started is get in touch.

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