Free time with a newborn is one of the most memorable times in a parent's life. As with any other major life event, financial planning is critical to making the experience as stress free as possible. Saving for maternity leave requires strategic financial preparation, especially in the US, where there is no mandate for paid leave for new parents. Although women are still more numerous than men in terms of parental leave, paternity leave is also increasing.
Saving for maternity leave (or paternity leave) doesn't have to be a daunting process as long as you plan ahead. Rather than worrying about finding additional sources of income, it is helpful to first find areas where you can save. With so many unpredictable factors affecting our daily lives, it helps to make your plan as detailed as possible.
Below we've outlined some of the best ways to stay on track financially while saving for maternity leave.
10 tips on saving for maternity leave
1) Check in with HR
Once you plan to inform your workplace of your pregnancy, contact your human resources department to clarify parental leave guidelines. These guidelines include health coverage, taking vacation and paid time off as part of your vacation, collecting partial payments for maternity leave, and claiming short-term disability.
Your HR department can also help you maximize a Flexible Spending Account (FSA) that allows you to use more pre-tax cash on upcoming medical and childcare expenses. Confirm what your insurance policy covers in terms of length of hospital stays, prescription drugs and medical supplies, and how long the baby will be covered by your policy after birth. Now that you've cleared the details with HR, you'll want to discuss your upcoming maternity or paternity leave with your supervisor and employees as well.
2) Take responsibility for your expenses
If you are not actively following and monitoring your budget, now is the time to do so. Track everything you and other family members are spending for at least 30 days to get a clear idea of where your money is going each month. Pick a time for a bi-weekly family reunion to keep your progress going.
Successful saving is about defining a realistic plan of action with all of the parties that spend and make money in your household. Saving for maternity leave is about determining what your income and expenses are when you are unemployed and taking care of your baby, at least to the extent that you can reasonably project them.
3) Enter the numbers to maximize your budget
Too many families saving for maternity leave rely heavily on estimates rather than math to find out details. Make sure to project your monthly income while on maternity leave.
Take into account the payouts you receive for partially paid maternity leave from your employer, unused vacation days, and other additional income that you would like to generate from freelance or part-time work. Then subtract your maternity leave income from your expenses. If it is negative, that number is the bare minimum that you need to save for every month that you are not working when the baby arrives.
Taking the time to specifically predict your budget will remove the confusion and stress associated with unforeseen expenses. Don't forget to also take into account changes in expenses that occur after the baby arrives. Baby items and equipment can get expensive very quickly. Also, you may spend more money on takeaway and outsourcing cleaning or errands because you have less time with a demanding newborn.
4) Automate your savings
When it comes to automating your savings, the concept is simple: if you never see the money, you won't be tempted to spend it. Set up an automatic savings plan through your bank that automatically transfers money from check-in to savings.
You can also contact your employer to have part of your paycheck deposited directly into your savings account each payday. Using a budgeting app that lets you see how much you're stashing in real time also helps.
5) Make couponing a family activity
Savings can really add up by identifying ways to take advantage of low hanging fruit opportunities like couponing. There are tons of free couponing websites online, but don't miss out on the old fashioned couponing and start a folder or folder too. Make sure you don't negate your hard work by splurging.
Try to cut any non-essential expenses in your budget and allocate that money to your savings account instead. If you get a tax return or a bonus, skip buying the fancy crib and save. As you bond with family members, friends, and neighbors, you can take advantage of gently used baby items to save money. Also, it can't hurt to see if there is a second hand store near you that specializes in baby clothing and supplies, such as B. Once Upon a Child.
6) Get a credit card that can save you
While it is important to be wise with your credit card usage, your credit card spending can help you with your budgeting goals. Depending on your stage of life, certain credit card options may make more sense than others.
As a reminder, no matter which card you use, always use the same best practices to improve your credit score. For example, try to keep your occupancy low and always pay your bill on time. After all, late payment can have the greatest negative impact on your credit score.
7) Choose a bank that supports your financial goals
Stick to accounts that are free of balance requirements and fees, and compare interest rates with local banks and credit unions. Remember, smaller financial institutions sometimes offer more competitive interest rates than large banks. So don't be afraid to do some shopping.
If you just want to do convenient banking online, some online banks offer very competitive interest rates. For example, having a high-yield savings account will help keep your money working for you while you save for maternity leave.
8) Take advantage of family-specific discounts and tax credits
With a little research, you are likely to find a wide variety of discount programs and free resources for parents-to-be. Don't forget to take advantage of tax credits too.
For example, you may be able to claim child tax credit for the year your baby was born (based on when it was born), deduct qualified childcare expenses, and contribute to a 529 college savings plan. All of this will reduce your taxable income and leave more money in your pocket.
9) Plan to keep your professional skills sharp
There are certain realities that are inevitable when taking extended parental leave off work. Being away from your job can leave you feeling out of touch or stressed out when you return.
Taking some time during your parental leave to learn key skills or catch up on company / industry news can help you maintain job security (and therefore financial security) when you return to work.
10) Avoid the Baby Registration Trap
Baby registries are big business and can be big budget busters. Register only for the items that need to be really brand new and reach out to friends, family, and consignment stores for gently used items before registering.
From financial coverage for maternity leave to childcare costs to increased medical expenses and savings accounts for universities, a lot will surely come to mind. Fortunately, you are not alone on this parenting journey. There are plenty of families out there making it work with lean budgets that are less stressful if they follow tips like the ones we've compiled in the graphic below:
With so many strangers, taking responsibility for your finances in preparing for a baby is empowering. After all, saving for maternity leave is the precursor to an overall budget revision once the baby arrives. To avoid financial shocks, work with your family to follow best practices and create a budget that works for you.
Create a game plan and use the resources as you prepare for parental leave. Having your finances in check while spending time outside of work is undoubtedly a feeling of calm. Take control of your budgeting goals and get creative with new ways to generate income and save money.
National partnership | US Census | CBS