Welcoming a new baby is a significant life event, and while it brings happiness and anticipation, it can also be overwhelming for many parents. Adapting to the role of a new parent, especially in terms of personal finances, can present challenges.
If you are apprehensive about the financial implications of maternity leave and how to manage your budget during this period, consider the following five recommendations to organize your finances.
Examine your company’s parental leave policy and compensation
When preparing financially, the first step is to determine from your employer the length of your maternity or paternity leave and the corresponding compensation. Most companies provide statutory maternity pay, with some offering supplementary packages such as full income for a few months followed by half-pay, or even extended periods of full pay.
Statutory Maternity Pay (SMP) is accessible for up to 39 weeks, with 90% of average weekly earnings (before tax) for the initial 6 weeks, followed by £172.48 or 90% of average weekly earnings (whichever is lower) for the subsequent 33 weeks. SMP is subject to Tax and National Insurance deductions and is disbursed in the same manner as your regular wages.
It is also advisable to compare your company’s parental leave benefits with those of its primary competitors using Nugget Savings, for benchmarking purposes. Ensuring that your workplace offers industry standard benefits is crucial, and if not, it might be an opportunity to negotiate for an improved parental leave package.
Once you are aware of your entitlements, this information can be used to construct a budget and assess whether you need to accumulate savings before commencing maternity leave.
Verify if you’re eligible for supplementary benefits and assistance
If you have concerns about the adequacy of maternity pay, check if you meet the criteria for extra benefits from the government using the Turn2us benefits calculator.
It is also worthwhile to seek assistance from online communities. Consider following Pregnant Then Screwed and Maternity Action on Instagram, and explore the resources available on Nugget Savings’ community platform to aid you in preparing financially for maternity leave.
Commence setting aside a parental leave fund while still employed
Prior to starting maternity leave, consider earmarking a portion of your income and assessing potential expenses to minimize.
In addition to reducing non-essential costs such as dining out and subscriptions, explore the possibility of discussing increased work-from-home days with your employer to save on commuting expenses. These savings can contribute to your parental leave fund.
It is also essential for your partner to contribute to the parental leave fund. Establish a minimum monthly contribution that both of you agree to maintain.
Engage in a dialogue about your shared finances with your partner
If not already done, it is advisable to have a discussion with your partner about your finances. Evaluate your respective incomes, personal expenses, and joint account contributions, and establish arrangements for both of you to contribute to a parental leave fund. If your partner earns more, consider whether they can temporarily increase contributions to your joint account until you return to work.
It is equally important for your partner to evaluate their personal finances and identify areas where unnecessary expenses can be reduced to enhance savings and provide financial support during parental leave.
Assess your finances and give priority to essential expenses
Trimming expenses where feasible to budget for your leave is crucial. This is only a temporary measure and does not mean you cannot partake in social activities, but rather reallocating your funds for financial peace of mind during the initial months of parenthood.
Points to consider for minimizing expenses:
• Decreasing takeout meals and purchasing lunches at work
• Terminating subscriptions you no longer require or use
• Comparing and finding more economical insurance
• Shopping at a lower-cost supermarket
• Cutting down on utility bills by switching providers
Some mortgage lenders might offer a mortgage respite during maternity leave, which can significantly affect monthly expenses because the mortgage comprises a substantial portion of income. It is advisable to inquire with your mortgage provider about this option.