Financially Prepare For Maternity Leave: As you wait for your bundle of joy to arrive, take the time to get your finances in order. Bringing a new life into the world is one of the most exciting things in life, but it can bring about a whole new set of stressors, too. Having a baby is a big financial obligation but not an impossible one. Make sure you do some financial preparation before you have your baby so you can spend more time with your new bundle of joy and less time worrying about money.
As you start preparing for your due date, there are a few financial steps you can take to ease into your new lifestyle. Let’s talk about some strategies to help you navigate the financial demands that come with having a baby and taking a bit of time off of work.
5 Tips To Help You Financially Prepare For Maternity Leave
1. Understand Your Company’s Parental Leave Policies
Familiarize yourself with your company’s parental leave policy to understand any changes to your financial situation when your baby arrives.
After your baby is welcomed into the world, you’ll need to take some time off not only to take care of your baby but also to take care of yourself and adjust to your new life with your bundle of joy!
As you start the beginning steps to financially prepare for a baby, both you and your partner should start looking into your employer’s parental leave policies. In the United States, it’s not a requirement for your company to offer you any type of paid leave when you have a baby. With that being said, some companies do offer some type of paid parental leave as part of their benefits package.
If your company does offer paid parental leave, work to understand how long they will pay for you to take time off and if the pay is any different from your current salary or pay rate. If your company doesn’t have a paid parental leave policy, you’ll need to come up with a plan to offset those costs.
Understanding your parental leave options as soon as possible will help you plan for any changes you may need to make to take time off.
2. Re-Examine Your Budget
Create a realistic budget for both the time leading up to having your baby and after your baby arrives.
Raising a baby is expensive—that’s just the simple truth. Raising a child in the first year is estimated to cost about $21,000, so that’s bound to change your financial situation. You should take the time to adjust your current budget and come up with a tentative budget for when your baby arrives.
When building a budget for your new lifestyle, consider the following:
- Estimate how your financial responsibilities will change – Be realistic about the cost of raising your child. You will have a lot of large one-time expenses at first, but that’s bound to lessen as your child ages. Understand the potential costs of services like daycare and the cost of your basic needs, like diapers, formula, and clothes.
- Consider which financial goals are most important – While your main goal when your baby arrives will probably be to adjust to your new lifestyle, you still need to keep your other financial goals in mind too. Make a plan to tackle things like paying off large debts, building your savings, or investing in your retirement plans.
- Find places to reduce your spending to learn to live on less – To prepare for when your baby arrives, you should analyze your current spending habits to see where you might need to make modifications. Practice living on less before you have your baby so that you can save a little bit of money and get a taste of how a stricter budget feels.
Having a baby will without a doubt change your family’s financial situation. By having a realistic budget planned out, you will feel much more prepared to welcome your baby into the world.
3. Get Your Emergency Savings In Order
Have a financial safety net so you can be sure you have enough money to face any emergencies.
Everyone should have an emergency fund, but it’s especially important to have one when you have a baby. An emergency fund is a separate savings account that should only be used when absolutely necessary. Those reasons can be anything from medical emergencies, a loss of a job, or anything else that may put your family through financial hardship.
It’s recommended you save anywhere from 3-6 months’ worth of your monthly expenses. You should keep your emergency savings in some type of high-yield account so you can take advantage of interest rates. To make sure you are consistently making contributions to grow your emergency fund, consider making regular, automatic transfers. Sit down with your partner and determine what kinds of situations would warrant you to withdraw money from your account. With an emergency fund, you and your partner can be sure you have a bit of a financial cushion for when the baby comes.
4. Prepare For The Unexpected
Make sure your estate plan is up to date so you have a plan in place in case you or your partner pass away.
On the topic of emergencies, you need to think realistically about your estate plans now that you will have a little one who depends on you. If you or your spouse passes away, you need a plan in place to outline how you would like your child to be cared for and how you would like any of your assets to be distributed.
Both you and your partner should create a will if you don’t have one or make appropriate updates if you do have one already. If you die without a will, it will be up to a court to decide who will take care of your children and who will get your assets.
You should also name a guardian and a trustee for your child in your estate plan. The guardian you name would take care of your child and the trustee would take charge of your child’s financial needs should you and your partner both pass away. Your guardian and your trustee can be the same person, but they can be different, too. Work with your partner to determine who you trust to take care of your child, and be sure to update your estate plan with your wishes.
Another way you can prepare for the unexpected for your family is to invest in a life insurance policy. If you or your partner dies with an active life insurance policy, the beneficiary would receive a death benefit payout. That payout could be used for any financial hardships or responsibilities your surviving family members may encounter. It can be used to pay for funeral expenses, keep up with bills, or even be given to your child as an inheritance.
Getting a policy doesn’t have to be time-consuming. After all, you have enough to worry about with a baby on the way! Some companies have started offering a type of no-medical-exam required life insurance policy online where you can get a quote and know if you are approved almost instantly. Despite not requiring a medical exam, these policies are still extremely affordable and are likely to provide the amount of coverage your family needs. With an active policy, you will have peace of mind knowing your family will have some type of financial plan in place if you or your partner were to pass away.
5. Understand Eligible Tax Credits
Do some research before tax season to see which tax credits and breaks you can use this year
Since it requires a lot of money to raise a baby, be sure you’re taking advantage of all the tax breaks available to you. Tax season may be a while away, but it’s still good to know now what breaks you may be able to use for the upcoming year. Which tax breaks are available to you will vary depending on your financial situation, so make sure you do your research or even plan to work with an accountant to take advantage of any breaks possible.
Bringing a baby into the world is no easy task, and preparing for maternity leave can bring about some stress. However, with some planning and consideration, you’ll ensure a smooth transition into your new financial situation. Congratulations on this exciting journey, and may your maternity leave be filled with love, happiness, and financial peace of mind!
Which of these financial preparation tips for maternity leave resonated with you the most, or do you have your own tried-and-true advice to share with soon-to-be parents? Share your thoughts in the comments below!
*Disclosure: Collaborative Post
Thanks for stopping by,
Love you all ❤️
Franca 💋
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