How to Manage Your Money During Maternity Leave

Sometimes, life surprises you with a baby. Or, you might have planned for it. Either way, it makes sense to do some planning before your wonderful gift arrives.

You may be worried about making ends meet when you or your partner are out on parental leave. If you are the birthing parent, you should take some time to recover physically and mentally after having a child, and all caretakers will need time to bond with a new baby.

However, if you plan early by establishing a budget, reducing your spending, coordinating your leave periods, planning for other expenses and exploring the possibilities of a career change, you could adjust very well and have the best of it all.

Get on Your Post-Birth Budget Now

Before you have the baby, it is a good idea to work out what your budget will be after the baby. If you are both planning on going back to work, you will have to pay some sort of childcare bill during that time.

Create a budget and begin following it as soon as you can. This will start saving you money fairly quickly, and you can put the extra money into a savings account.

The extra savings can be used to supplement remaining income while you are on maternity leave. If you start budgeting and saving at the beginning of the pregnancy, you might save close to the amount you need for your leave.

You could try to pay down your debt now. It might be more difficult with added unexpected baby expenses and additional medical bills and food costs from a new family member, but it is necessary when the baby comes.

If you plan on quitting after the birth, put as much of the second income into savings as possible.

One fun, but pointless spending endeavor for first-time parents-to-be is to stock an entire closet full of baby clothes. Your child will grow out of these clothes very rapidly. Most of them will not be worn. 

Spend on outfits minimally, and invest more in onesies. You'll get more uses out of the money you spend.

Consider Short-Term Disability Insurance

Some short-term disability insurance plans will cover maternity leave for a set period of time. This insurance can also cover you if you are put on bed rest during your pregnancy. If you are in a situation where you or your partner might become pregnant, you should consider adding this to your insurance policy.

Short-term insurance is generally required to be in place before a pregnancy. Your policy may have a waiting period that will affect how soon it will cover something like a pregnancy, which most insurance companies consider a planned event.

You may need to shop for some additional coverage if your existing policy provider does not offer short term coverage

Read through your policy carefully, as you may be required to return to work after maternity leave to take advantage of the benefits.

Save Up Your Vacation and Sick Time

Although one more vacation with your partner before you have the baby sounds appealing, you may want to save up your vacation and sick days to cover your maternity leave. This option is one of the simpler methods of covering a portion of your maternity time.

However, it may not be enough if you are planning on taking three months of leave. You and your partner could both save up, alternating parental leave so that you could wait to put your child in daycare until they are three months old or more.

Taking your parental leave at different times will maximize the amount of time you can have a parent home with your child.

Check on your company's policy for saving up sick days and vacation days. Some companies may limit the amount of vacation you can claim or how you can use them in conjunction with each other.

If you are quitting, your employer may give you a lump sum if you have unused sick days or vacation time.

Plan for Other Expenses

In addition to replacing your missing income, you might need to plan for extra expenses you didn't have before. Your medical costs may go up with baby visits or post-birth care. 

You may find that you are going through more diapers than you budgeted for (no first-time parent can predict this—babies create a ton of used diapers). It helps to have extra money on hand the first few months after you have a baby.

You can purchase some items second hand, but not everything. Your baby will be growing fast, so you will need to have enough income to replace clothing and shoes every few months.

You should plan on not having the normal amount of energy during this time. Sleep can be hard to come by as a new parent. A menu plan for the first month can help you save, by structuring your grocery spending. 

The cost of baby items will add up quickly. Diapers and formula can be very expensive, so look for coupons and try switching brands to find the best deal possible.

Consider items like life insurance and the added cost of adding your child to your health insurance policy.

And if possible, start planning and saving for your child's education immediately.

Look for Ways to Make Money During Maternity Lave

You may be too tired to do much during maternity leave, but if you need to make money and you do not have any sick time or short-term disability insurance, you may want to look for additional ways to bring in some additional money. Your employer may allow you to work from home for a time or permanently. Working as a freelancer or contractor can provide a decent income as well.