It's a big step, leaving your paid job to become a stay-at-home mom. Planning ahead will help ease the transition, so read on for some suggestions on how to prepare for your maternity leave.
While maternity leave is an exciting and wonderful time in a new mom's life, it can also be a bit scary. Yes, it's about the responsibilities of being a parent, and that includes providing for the family both emotionally and financially, so that raises the question: Are you financially prepared to take maternity leave?
In Canada, employers are not required to offer paid maternity leave, so that will leave you relying on government employment benefits for monetary compensation during your time away from work. Until you submit your application and appropriate paperwork requesting employment insurance (EI) benefits, you won't know for sure how much you will be eligible to receive. Per Service Canada, a working woman on maternity leave may be eligible to receive 55 per cent of her average weekly salary. This amount is based on the average weekly insurable earnings and the maximum yearly insurable earnings limit of $45,900, which came into effect January 1, 2012. This is only an example, as several factors are taken into consideration. But if you are a working woman soon to be on maternity leave, one thing is certain: Your regular monthly income will be greatly reduced. So how do you manage this financial hit? Here are a couple of ideas.
Start saving early
Planning ahead is important, perhaps even when the idea of adding to your family is just a fleeting thought of what if. Your new baby will require disposable diapers or a service, new clothes, a stroller, a bassinet or crib, among other things — and that's just to get you started. You will also want to start an education fund or savings program, such as enrolling in an RESP or investing in Canada savings bonds. By starting early, when you still have a regular salary, you can purchase some of the necessary baby items and begin investing so you won't feel as much of the crunch when your newborn arrives! Another idea is to defer your paid holidays to your maternity leave. The extra pay you will receive while you are at home bonding with your newborn is worth it!
Review your budget
Before it becomes a necessity, take time to plan your budget. What are your necessary monthly expenditures? Where can you make some cutbacks? What do you need to live comfortably? A specific savings plan should help you offset the loss you incur when one salary has been temporarily reduced, but planning a reasonable budget will ensure you have enough money reserved for everything you need, including a rainy day fund!