The excitement of learning we were expecting was immense for both my husband and myself. However, after the reality of impending parenthood began to settle, we became aware of the financial responsibility that lay ahead. Paradoxically, while expenses shoot up, finances shrink due to unpaid maternity leave. We understood that swift financial preparation was paramount to ease our minds from money concerns so that we could focus on the arrival of our baby.
UNDERSTANDING MATERNITY LEAVE
The Family and Medical Leave Act facilitates a 12-week vacation for employees of a private entity with a workforce of more than 50, or of a state or federal agency, who have given more than 1,250 hours of service to the company within a year. Unfortunately, a significant 40 percent of employees don’t meet these criteria, making them ineligible. Even for the eligible, it’s a bitter pill to swallow as the leave comes with no pay. Data from the 2011 Census Bureau showed only half of first-time mothers utilized any form of paid off-time post-birth. That’s quite shocking!
Here are some ideas on how to financially prepare for the arrival of a baby:
STATE DISABILITY
Living in California, Massachusetts, Rhode Island, or New Jersey puts you in a unique position, as these are the only four states that currently offer paid family leave laws. In California, for example, you are entitled to State Disability that compensates up to 55% of your earnings from the preceding year. Though these funds may not completely cover your expenses, they are undoubtedly a positive step.
COMPANY-SPONSORED PAY
Merely 11% of businesses provide paid family leave independently. However, if you are fortunate enough to be employed by one, you must certainly avail it!
SICK AND VACATION LEAVE
It’s common for employees to combine their sick and vacation leave to financially get by during their maternity leave. But often, these accumulated leaves fall short to cover the three months usually needed.
SAVINGS
The safest strategy is to start a maternity savings account at the earliest. A contribution of $100 each payday could accumulate to roughly $1800 by the time the baby arrives. An app like Trim could further help identify potential savings in your monthly expenses. Another method of enhancing your maternity fund could be by doing part-time work, conducting online surveys for cash, or selling unused household items.
PRIVATE DISABILITY INSURANCE
Purchasing a disability insurance plan from companies like Aflac is an option but planning is crucial as policies usually require a 10-month prior purchase.
REDUCED WORK SCHEDULE
If it is permissible, consider negotiating a part-time work arrangement. While not an ideal solution, it provides some income, and you’ll get more time at home than with a full-time job.
Preparation is key! Plan ahead and make your financial moves as early as possible to ensure a worry-free arrival of your bundle of joy. Did you take a maternity leave? How did you financially prepare for it?
