How To Plan Financially For Your Maternity Leave
Having a baby is a major life goal for many couples, and taking time off work after your child’s birth is essential. But unless you fall into a small category of the American workforce, around 12%, of all employees, you may not be entitled to paid leave after your newborn arrives.
Budgeting for maternity leave is crucial if you’re going to be receiving a limited income in the first weeks of your baby’s life. Let’s take a look at the laws surrounding leave for new mothers and consider the best ways to finance your expenses during this time.
Understanding The Family And Medical Leave Act
The legal aspects of maternity leave in the United States are defined by the Family and Medical Leave Act (FMLA). You’ll want to familiarize yourself with the key features of this legislation before you plan your pregnancy and apply for time off.
- The FMLA states that mothers are entitled to 12 weeks of maternity leave in the year following the birth of their child. This can be taken in a single block or split into several shorter leave periods
- Unlike some foreign countries, the US doesn’t guarantee paid maternity leave. The salary you receive during your time at home will be determined by your employer’s HR policy. You may receive less than your regular income or no income at all during this time
- It’s important to note that some companies aren’t required to comply with the FMLA’s leave requirements. However, organizations with more than 50 employees, public agencies and public schools are required by law
- Finally, you need to have worked for your current employer for at least 1,250 hours in the 12 months preceding your leave to qualify
Paid Leave vs Temporary Disability
Paid leave policies vary widely among employers. You’ll want to consult with your manager or HR department to make sure you understand exactly what benefits you’re entitled to.
Some of the factors to bear in mind include:
- How long will your leave be?
- How much will you be paid while on leave and when will you receive these amounts?
- Whether your employer will continue to contribute toward your health insurance, HSA, and other benefits
- If you’ll be permitted to work part-time or take on a side job with another company when you’re on maternity leave
If your employer offers you a disability benefit during your time at home, you’ll need to consider a few things:
- How long will you be permitted to stay at home?
- Will you receive the same benefit amount each month? Many insurers will reduce your payments in the second and third months
- Are there any special conditions? You may lose your benefits if you receive additional income during your maternity leave
Creating A Budget
Before you go on leave, take some time to go through your monthly budget and plan for your expenses after you give birth. That’ll make it a lot easier to manage your finances at a time when all of your attention will be focused on your newborn.
- A good budget lists all your income on one side and your expenses on the other. Once you know how much maternity leave or disability income you’ll receive, you can write it in and then focus on your expenses
- Breaking down your monthly costs into essentials and nonessentials is a great way to cut back on nice-to-haves while you’re away from work
- Don’t forget to include the childbirth medical expenses you expect to pay including diapers, clothes, baby formula and more
Funding Your Maternity Leave
Many new mothers find that their employers aren’t willing or able to offer them maternity leave at full salary. However, there are ways to pay for the shortfall in your monthly budget.
- Personal loans are an excellent choice. You can apply for one online, submit your identification and financial documents electronically (in most cases), and receive a decision on your application in a few days or less
- If you choose to apply for a medical loan for maternity leave you’ll want to check your credit score ahead of time as this can have a big impact on the APR your lender will offer. Bad credit options are available but it’s important to note that these loans come with higher interest rates and associated fees
- Other options you may want to explore include medical credit cards to pay for your hospital bill and a HELOC (Home Equity Line of Credit), which lets you borrow against the equity of your mortgage. If you go this route, you’ll want to choose a card that has a 0% introductory APR and pay down your balance as soon as possible