Financially Prepare for Maternity Leave: Don’t Go Back to Work Broke
From the day you found out that you were going to be a mother, you started to plan. We all do, in our heads. We plan cute ways to announce the new baby, or a witty way to capture our growing baby bump. I’m sure you are going to conjure up a gender reveal party or even a baby shower. But, one thing that most first time mothers forget is how to financially prepare for maternity leave.
Imagine your baby in a warm, cozy, a nurturing environment entering into a cold, loud and unfamiliar world. His attachment to you during this time as you help him transition into the new world is so important. The optimal time for this transition phase, also known as the fourth trimester, is typically 12 weeks. However, some mothers find themselves needing to return to work before 12 weeks due to financial constraints.
“Only two out of 185 countries and territories DO NOT mandate paid maternity leave. The United States is one of them”
Currently, the United States has what is called FMLA (Family and Medical Leave Act) which was introduced in 1993. This act entitles working mothers job security for up to 12 weeks for the birth of her child and to care for that child. The act offers job security, that’s it. This means that your employer cannot fire you for reasons related to your pregnancy, birth, or the need to care for your baby. However, in order to qualify, you and your employer must meet certain requirements. These include the following:
- Employee must have worked 1,250 hours or worked for 12 months
- Employer must have at least 50 employees within a 75 mile radius
Let me reiterate the fact that FMLA is UPDAID leave. In fact, out of 185 countries and territories, the United States and Papa New Guinea are the only two that do not mandate paid maternity leave. (ILO) C’mon ‘Merica!
Because of this, many mothers find themselves returning to work early, needing to go on government assistance, or they end up digging themselves into heaps of debt.
10 ways you can financially prepare for maternity leave
Calculate How Much you Need to Save While you are on Maternity Leave
There are many factors that determine how much you will need to financially prepare for maternity leave. First, determine how much it will take to replace your salary for the amount of time off that you want to take. Then add the estimated cost of labor and birth. Don’t negate the cost of newborn essentials like diapers, wipes, and feeding items. Once you have a total, then begin subtracting STD, PTO, and HSA if you have them. The more you save, the better you are prepared for unanticipated costs. My savings ended up being about 3 months of rent/mortgage for each pregnancy and it worked out every time.
Anticipate Medical Costs
I highly suggest you contact your insurance company and provider to get an estimate of how much it would cost for labor and delivery. This will vary greatly by the type of birth, your doctor and insurance provider. If you cannot get an estimate, ask your coworkers if they would be willing to share their costs with you. Even a ballpark range will help you prepare. My medical bills ranged from $4500-$6500 from pregnancy to postpartum.
Have a Minimalist Baby
Babies really don’t need much. All they need is food, a place to sleep, diapers, wipes, and some clothes. Everything else is a convenience. Most new parents think they need to have thousands of baby items to “survive”, but the reality is we are all just winging it. There is no manual as to what your baby will need or like. If you stick with the essentials, you are bound to save a ton of money.
Short Term Disability
Short Term Disability is one the easiest ways you can continue to get a check while you are out on maternity leave. It typically pays 2/3 of your pay for 6-8 weeks. 6 weeks for a vaginal delivery, 8 weeks for a cesarean delivery. There are 4 ways to get short term disability.
First, some employers offer STD to all their employees whether they need it or not. This is a taxable benefit for all eligible employees. Check with you HR department to see if your company offers STD and if you are eligible.
Second, for companies who do not offer STD, they may have an option to purchase during open enrollment. If you plan to have a baby in the following year, make sure to elect STD during this time. Otherwise, you won’t be covered.
Pro tip: If you know you are going to have a baby in the coming year, choose the STD option with the least waiting period. It is typically more expensive but it will give you more money in the long run. If your plan pays for 8 weeks, and your waiting period is 14 days, you’ll only get paid for 6 of those 8 weeks.
Third, just like the marketplace offers private party insurance, you can purchase private party short term disability as well. Almost all companies require coverage BEFORE you are pregnant.
Lastly, few states mandate paid maternity leave as a state benefit. California, New Jersey, Rhode Island, and New York are the only states that offer paid maternity leave. Now excuse me while I write a letter to our lawmakers to get with the program and follow these states and the rest of the world.
Save your PTO
Paid time off is a wonderful way to financially prepare for maternity leave. To take a full paid maternity leave, you’d need 480 hours of PTO (if you work 40 hours/week) however most companies cap your PTO off way below this. So, save as much as you can. Avoid using PTO unless you really need to. Check to see if your company allows accrual of PTO while on maternity leave, then you can use that as well.
Utilize a Health Savings Account
Contriute as much as you can into an HSA account. Why? These are pre-tax dollars. If you know that you will be using them, then why not contribute and save taxes? Ask your provider what the max contribution is per family, then use your HSA to pay for your medical bill in full with your pre-tax dollars.
Halt contributions to retirement
You may want to consider halting your contributions to retirement, especially if you are struggling to find money by other means. This is only temporary and you can restart after baby is born. If you don’t want to stop contributing entirely, consider reducing the amount that you are putting into retirement.
Most employers will pay time and a half for their employees who work extra. This can add up if you’ve got the time and aren’t feeling horrible yet. Consider this option during your second trimester, when your energy returns.
Sell, sell, sell
Go through your home and get rid of things you don’t need. Sell them at a garage sale, or list them on online sites like Craigslist, Facebook yard sale pages, or eBay. One woman’s junk is another woman’s treasure. You’d be surprised at how much you can sell by getting rid of unused makeup or used kitchen appliances.
Sign up for all the freebies
This post contains affiliate links.
If you haven’t already, sign up for Amazon Baby Registry. When you sign up and complete your first purchase from the registry, you’ll receive a welcome box filled with freebies. I scored an Avent bottle, a Muslin swaddle blanket, and a cute onsie in addition to sample sizes of other things like diapers and wipes.
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