The weeks and months leading up to your maternity or paternity leave can be exciting. You likely have spent many months preparing for the changes to take place in your life and your home. In addition to preparing your home, you'll also want to prepare financially for your extended time off work for maternity or paternity leave.
Understanding Your Health and Maternity/Paternity Benefits
Depending on the company you work for, the length of your leave may vary. With an effective plan, you can have plenty of time to enjoy your growing family before returning to work. However, it would be best if you began by understanding the health and leave benefits your employer provides.
Work with an HR representative in your company to understand what your health insurance and maternity/paternity benefit your organization provides. Specific questions you want to ask include:
- How much of your health insurance deductible have you already paid for the year and how much remains?
- Are you responsible for co-payments or coinsurance? If so, how much?
- What is your maximum out-of-pocket for your specific insurance policy?
- Will you be responsible for additional health insurance while on leave?
- Does your organization offer some paid leave? If so, how much? While the U.S. does not require businesses to offer paid maternity or paternity leave, the Family and Medical Leave Act (FMLA) requires most businesses to offer up to 12 weeks of unpaid leave after having or adopting a child. Some organizations do offer paid maternity and paternity leave, though.
- How many vacation days have you accumulated? Your company may require you to use your vacation days before using your FMLA benefits, which allows you to get paid for some of that time.
- Do you have a short-term disability plan through your company? If so, does it provide for income during maternity or paternity leave, and how much?
You should note that some companies require employees to repay health insurance payments they covered during your leave if you do not return to work.
The better understanding you have of your income and obligations during this exciting time, the better prepared you can be for creating a savings plan and budget for the time leading up to the big day and after.
Saving and Budgeting
Hopefully, you begin this process as early as possible so you have a few months to prepare for your upcoming leave. The sooner you start making preparations and saving money, the better it will be for your budget.
- Start with a list. Make a list of your current income and current expenses. Then look for ways to reduce costs and put some money into savings while, at the same time, investing in the necessities for your home and family. Also create a budget that includes changes and new expenses (diapers, formula, supplies, and equipment).
- Sell your old stuff. While you're decluttering your home and making room for your family's new addition, consider selling items on eBay, consignment stores, or having a giant yard sale rather than throwing them away or giving them away. That will help pad your savings.
- Shop smart. Consider shopping secondhand. Find consignment shops and buy clothing in a variety of sizes.
- Cook ahead and freeze foods. Doing this now, while you have the time and your full income, will help stretch your money further while you are on leave and getting to know your baby.
The key is to reduce expenses during this fantastic time in your journey while making sure you have the necessities in life covered. Knowing your finances are in the right place will make this vital bonding time with your child more enjoyable and relaxing.
Creating a Plan that Will See You Through Your Leave
Starting early and creating a plan allows you the ability to enjoy your full leave without worrying about paying your bills or going into debt to do so.