Having a Baby: Here’s How Much to Save For Maternity and Paternity Leave

In February 2020, I gave birth to a healthy 8lb 12oz baby girl. My out-of-pocket cost for labor and delivery? $10,000. That didn’t even touch the amount I had to save for unpaid maternity leave.

In this article, I’ll break down the costs for you to prepare for a family leave after having a baby and even give you 10 tips for saving for maternity and paternity leave.

First, why should you budget for a family leave?

The purpose of budgeting is to have enough money saved in order to replace your income. Whether you’re staying out six weeks or six months, loss of income can impact your financial well-being. Budgeting can help you prepare and reduce the financial strain (and stress).

Here’s what you should consider if you’re planning on a family leave.

Your family leave budget will vary depending on factors that include your lifestyle, cost of living, preferences, and how you actually plan on covering the leave. I seriously wish I could give you an exact dollar amount, but like all things in personal finance, your family leave is, well, personal.

Important questions to factor into your budget

1. What are your monthly expenses?

We touch on this in literally every article, but you should be tracking your expenses and then organizing the money in different categories to help you keep track of how you spend. (Better known as a budget. ) Determine which items from your budget are essential. These usually include the following:

  • Housing
  • Food
  • Basic Utilities (water, electric, trash, oil or gas) 
  • Transportation
  • Insurance
  • Miscellaneous and monthly expenses

Adding all of this up will help you figure out the grand total of how much you’ll need to take time off after having baby. This total belongs in your expense list.

2. What are your estimated expenses for a new baby?

Babies are cute but the list of necessary items to keep them alive (and well cared for) comes with a hefty price tag. Some significant purchases include bassinet or crib, bottles, clothes, diapers, carrier, stroller, and formula if you’re going that route.

Pro-tip: Breastfeeding moms can score a breast pump from their insurance company.

Add up the cost of things you didn’t receive at your baby shower, and add it to your expense list.

3. What are your estimated medical expenses?

If your medical provider isn’t helping you with a breakdown, you should get on the phone with your insurance company. Every plan is different, but most health plans will cover a major portion of the costs of delivery and aftercare. However, you still may be responsible for part of the bill. Your costs may include:

  • Deductible -the amount you pay for a service before the insurance company begins paying. 
  • Copay – a fixed amount you pay for a service, typically .
  • Co-insurance – is your share of the costs of any service provided until an out-of-pocket maximum is met.
  • Out-of-Pocket Maximum – is the monetary limit an insured patient will have to pay for a plan year. 

If your eyes were crossing reading that list, you’re not alone. For more tips on understanding your insurance coverage, check out this article.

Need some preliminary numbers for reference? I have some. Data collected by Fair Health states the average cost of having a vaginal delivery is between $5,000 and $11,000 in most states. For C-sections, prices range from $7,500 to $14,500. For military families and Tricare beneficiaries, the cost is very close to zero. The cost can vary, and it’s up to you to understand your financial obligations.

Add these up and add them to your expense list.

4. How much time are you taking off?

Under the federal Family and Medical Leave Act, employers with more than 50 employees are required to give up to 12 weeks of leave (so long as you’ve been with the company for more than a year). That leave, however, is not guaranteed paid.

Questions to consider when taking time off:

  1. Can you afford it?
  2. How long will it take to physically recover?
  3. How long does your company allow?

While a natural birth may be ideal, you should probably consider preparing for an 8 week leave in case of a C-section.

5. What is your company’s policy?

Paid and unpaid leave can play a huge factor in how much you have to save and budget. Though your company isn’t required to have an employee handbook, resources for standard leave policies can be found there. Scoured the company website and all of your handbooks to no avail? It might be time to talk to your human resources department. They’ll have everything you need to know about existing policies.

Worried about going directly to H.R.? Sites like List Your Leave or Fairy God Boss allows employees to share family leave coverage tips anonymously.

Example time

To be honest, I didn’t know to start looking at employee benefits while job-hunting until I was almost 30. I never factored in paid maternity leave as a consideration (but I also wasn’t really considering having a kid).

When I became pregnant, my employer did not cover a single day of leave. I had 120 hours of standard PTO (3 weeks) to stretch to 6 weeks. If you’re living paycheck to paycheck, three weeks with no pay is a long time to cover. That’s why we’re here: crunching the numbers.

Meanwhile, some states are requiring paid family leave.

Nine states (California, Colorado, Connecticut, Massachusetts, New Jersey, New York, Oregon, Rhode Island, and Washington) and the District of Columbia offer—or will offer— paid family medical leave. Hawaii provides paid medical leave in the form of temporary disability insurance

Pro-Tip: Just because a company has a policy doesn’t mean that you can’t negotiate for things like remote work or a flexible work week.

Remember to consider family leave benefits while on the job hunt

If you’re part of the great resignation, more and more companies are offering better family leave benefits, so consider this both as a negotiating point for a new job or an annual review.

6. What’s your expected household income while you’re on leave?

You’ll need to factor:

  • How much of your leave will be paid
  • Do you have short-term disability coverage?
  • How much can your partner can contribute?

Once you add up all of your estimated expenses (taking into account that your monthly expenses will be multiplied by months you’ll be out) you’ll subtract this from your total income from that timeframe. If you’re falling short, you’ll need to start saving in advance. We’ll talk saving tips in a few, but first, let’s circle back to being financially prepared with short-term disability insurance.

7. Will you have disability coverage during your family leave?

If you can’t work, disability insurance will provide a monthly benefit to help replace your income while you are disabled, typically to the tune of 66% of your income.

There are limitations to what disability insurance will cover

Not every case of disability is covered by your insurance. For example, not every plan will cover pregnancy so be sure to look at the particulars before signing up.

8. Do you already have an emergency fund?

An emergency fund increases your resilience through unexpected events, like furloughs, travel disruptions, or unexpected medical complications that could happen during labor and delivery. Emergency funds also provides psychological support in times of stress, giving us time to figure out our next financial move without losing access to essentials like food, transportation, or housing.

Nikki Dunn, CFP, and founder of She Talks Finance says, “people should think less about the ‘typical’ 3-6 months of expenses and think more about their unique situation and risk tolerance. Some people run businesses, have inconsistent income, or just feel more comfortable with more than 3 or 6 months – and that’s okay!”

Should you raid your emergency fund to pay for your family leave?

Your goal isn’t to raid your emergency fund to support your family leave. If time and resources allow, your emergency fund and your family leave fund will stay separate, saving for both simultaneously. And if that seems impossible, it’s ok to focus on one thing at a time.

Family Leave Saving Tips

1. Start Saving Early

No, we’re not telling you to start having kids early! But if you can picture yourself in the future having kids start saving now. The earlier you start saving for maternity leave, the easier it will be to build a comfortable nest egg by the time you go on family leave.

2. Be Realistic About Your Maternity Leave Savings Goal

If you only save $20 a month for maternity leave, will that cover all of your maternity expenses? Possibly not, especially if there are unexpected costs. But if that’s all you can afford, start there. And then consider other ways to increase your income like side-hustles. The more realistic your maternity savings plan is, the easier it is to follow through on — and achieve — your goals.

3. Do Your Research

As I mentioned before, the family leave benefits you are entitled to depend on several factors, including company policy and your location. So while it may be tempting to put off learning about maternity leave benefits until after the baby is born, doing so makes it more difficult to anticipate expenses. Also, knowing what kind of family leave benefits are available can help you make better decisions during your job search.

4. Maximize Savings With Every Paycheck

What will you do with all that money you save for maternity expenses? Put it in a jar under your desk? How about an account where you can earn interest? Better yet, put family leaves savings to work for you, in a high yield savings account.

Not having a baby until a few years from now: consider long versus short-term investment options.

5. Put the Money in a Separate Savings Account

Why put it aside? Putting the money you save specifically for your family leave in a different account than your daily spending serves as a mental nudge to not use them. It increases your mental accounting of your money and ensures that you’re actively working toward your savings goals by limiting overspending. Best of all, you’ll know exactly how much you have saved at a glance.

6. Consider Options Other Than Your Own Savings Account

If you already have an emergency fund or other accounts where you can save money, that’s great! But it may be time to rethink your plans and consider diversifying. The more ways you have of earning interest, dividends, or passive income on your family  leave savings, the faster they’ll grow — which is exactly what you want when planning for maternity leave.

7. Set Realistic Short-Term Goals

There are so many distractions when pregnant, including online baby classes maternity. It may be difficult to commit to a savings goal or create a plan for how you’ll get there, but it’s important to give yourself time to make good choices before the baby is born. If you aim too high, it can be discouraging when you fail to reach your intended target.

8. Pick Up Extra Income Sources Before Going On Maternity Leave

If you know that family leave will be a financial strain on the family, think about ways that you can earn extra money during this time. Babysitting other people’s children, hosting an online garage sale, renting out guest rooms in your home, and taking on freelance work all count as extra income.

9. Don’t Forget About Workplace Perks

Some companies offer discounted gym memberships and other perks to employees who make healthy choices. If you work for an employer that offers such benefits , take advantage of them while you’re still pregnant — don’t wait until your maternity leave begins! Join a prenatal yoga class, get a massage at the company’s discounted rate, and stock up on groceries from the local farmers market before your maternity leave begins so that you can spend less on these types of expenses.

10. Think Beyond Maternity Leave Expenses

While it’s important to set a leave savings plan that includes all of your leave expenses, don’t forget about the other financial responsibilities you have when planning for maternity leave. Expenses like utilities, car repairs, or school tuition won’t go away during your time off from work.

Jessie May of Metalhead Money points out the importance of one surprising expense: dental care. “According to the CDC, nearly 60 to 75% of pregnant women have gingivitis, an early stage of periodontal disease… that has been associated with poor pregnancy outcomes, including preterm birth and low birth weight.According to Cigna and my assorted Google searches, an adult cleaning ranges from $90-200 without insurance depending on location.”

So make sure you create a budget that allows you to cover these costs when you’re unable to earn money in a traditional way.

Related Reads

5 Financial Tips for Parents

How to Save for Family Leave

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