THE COST OF MATERNITY LEAVE
We are in a pretty lucky country where we do receive some pretty good benefits from employers and the government when we decide to take some time off for maternity leave.
Some people have really awesome staff benefits and if they are available, should definitely take advantage of them. Others may only have access to the government benefit, but that is still 18 weeks of minimum wage paid to you, with a potential for extra ongoing children payments depending on your personal situation.
Starting a family is a huge decision and definitely about more than just the money, so I don’t for a second think the financial side is the only decision, but given this is my area of expertise, I thought I would talk about the FULL cost of maternity leave.
There are the typical expenses that most people expect, but there is also some added extras that typically people forget about or don’t know the full ramifications of.
Lost income: This is the obvious one. For many parents, at least one person will take some time off, and whilst there will likely be some maternity leave benefits, in most cases there is going to be a period of time where your total household income is reduced. Most people have budgeted and planned for this reduction and is usually the basis for the decision about when the mum or dad decides to return to work if that is the decision that they have made.
Lost superannuation: when you are working, it is a mandatory requirement that your employer contributes at least 9.5% of your salary as superannuation. That means that if your salary stops, so do the contributions to super. Whilst it might not matter to you now, it will make a difference to your ultimate retirement nestegg. We have all seen the articles about the fact that women have less superannuation than men when they retire and this is the primary reason why.
Increased insurance costs: if you now have a dependant, you need to make sure that you have enough life insurance to cover the costs of raising your child if something were to happen to you or your significant other, or in the worst case scenario, both of you at the same time. It might not be substantial, but typically when my clients have a baby, there is a discussion around whether we need to increase their insurance to account for the new addition to the family. Similarly for health insurance to ensure that it cover’s your whole family.
Increased lifestyle costs: initially babies might not cost too much extra. They don’t eat too much, and whilst yes you probably need to include nappies in your weekly shop, the immediate ongoing expenses might not be high, but as time goes on, it only increases from there. Even if you don’t intend on sending your children to private school, the ongoing costs of raising 2 children is estimated to be $812,000* from birth to the age of 18, and that is a low estimate. Given that a lot of children don’t leave home at 18 these days, it is likely more.
I’m not writing this post to deter people from having children, not at all! In a lot of circumstances going on maternity leave is what I like to call the ‘maintenance period’ for finances. It means that you typically get by but may not be able to get ahead as rapidly before, but that’s not to say that you can’t.
For my clients, I have a future plan to make up any of the losses and put in place strategies to manage the added expenses and costs of their family so that financial stress is less of a worry. Like with any expense and budget, being honest about the expenses is the first step to being able to manage them in the future.
This post is from our resident Financial Planner Cara Brett, check out her details in the About Us section.
*Based on a study conducted by the University of Canberra.