Irish women are entitled to generous time-off to have a baby. But not many consider the significant negative effect of this maternity leave on their financial wellbeing, it seems. Carol Brick, Managing Director of HerMoney, specialist financial advisors for women, helps mums-to-be and their families prepare.
New mothers not only have to look after their new bundle of joy, but often have to deal with the stress of managing a revised budget and finances too. Unlike other countries, maternity leave in Ireland is a right, and we are lucky with the significant time allowed. But many women do not fare well regarding pay, while on leave.
Ireland is one of the worst countries in Europe for financial support, during and after pregnancy. Maternity leave pay very much depends on the company you work for. And, anyone working for a company that doesn’t pay maternity leave (and there are many, on account of the high cost of employment here) are only entitled to €274 a week from the State.
Self-employed women are in the same boat, getting just 26 weeks of State maternity benefit, and only if they have enough social insurance (PRSI) contributions.
So, for anyone planning maternity leave, you need to think ahead, financially, and put your house and budget in order before baby arrives
Make an accurate and realistic budget
It is important to identify all your monthly and yearly financial commitments to get a clear picture of how much money you need during maternity leave. Divide expenses into needs and wants. Include everything from household bills, personal loans and travel costs, to topping up pension contributions and, of course, a buffer for “mummy activities.”
Know your benefits
In addition to knowing what you spend, ensure you understand how State maternity benefits work, and what is on offer from your employer. Find out exactly what you are eligible for, and how much you’re going to receive per month. Don’t make any assumptions!
Knowing the income you’re likely to receive can also help you decide how much time you can afford to take off. The cost of optional additional unpaid maternity leave can be difficult for families who have not planned appropriately for it, beforehand.
Sometimes, it can make financial sense to split the leave between two partners, depending on who earns what; giving the opportunity to share the parenting experience.
Save before you have your baby
Save as much as you can to top-up your income on maternity leave. Do you want to just ‘make ends meet’ while you are off, or to be able to treat yourself to a nice dinner out, or a pedicure now and again? Putting money in a deposit account for a year or two before having a baby is a good option, so you can draw on it while you’re on leave, for routine bills or for treats.
Pay down debt
Paying interest on pre-baby debt is less than ideal, if your income is going to be reduced during maternity leave. Try to pay off as much of your credit card and personal loan debt as possible, before you start a family.
Explore your employment benefits
Look at your employment contract, and check if your life insurance and health insurance will still be in place while you are on maternity leave. If there is likely to be a gap in cover, then cover yourself by buying some extra private insurance. Also ensure you name your new child as a dependent on all plans, as soon as possible.
Go easy on spending
Having a baby is expensive enough without feeling the need to buy every new gadget you see on social media. A big mistake new parents make is buying too much new baby stuff that often doesn’t get used at all.
Much of the equipment, accessories and clothing is used for such a short time too, that taking some hand-me-downs from family and friends, and borrowing baby equipment, can really help keep maternity leave spending to a reasonable level.
Taxation
Families frequently do not ensure they are claiming and benefiting from the correct tax reliefs and credits, as well as any social welfare benefits and allowances, they may be entitled to. Women returning from maternity leave should ensure their tax credits are increased, to reflect the fact that they are no longer in receipt of maternity benefit.
Also, do not forget to take the time to claim back tax-relief on all relevant maternity-related, general medical and dental expenses. This is simple to do via the ‘MyAccount’ section of the Revenue website, or in your annual tax return if applicable.
Family Finances
Once you welcome kids into the world, careful financial planning becomes an essential aspect of family life. As a parent, it can be difficult to see past the day-to-day running of a busy home, as well as working outside the home. Too many families fail to plan for the future, in terms of saving, whether it’s for short-term emergencies or for children’s third level education. And an enormous number of families have little or no provision, should one or both parents have to stop work due to illness or, worse, die prematurely.
A financial advisor can help explore these options with you, so an appointment to chat, while you’re on maternity leave, can be helpful for a new parent.
Maybe it’s not the most romantic of thoughts, but it is realistic to ask yourself if you can afford to have a baby, before making space for a nursery. Children are amazing and priceless, but they can also be incredibly expensive!
Slán go fóill.
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