Many mothers in Canada are unprepared for maternity leave and often fail to discover its financial implications before it’s too late. As a result, they are often forced to take care of their newborn baby on dwindling reserves. While there are maternity benefits and parental benefits that you can collect during your leave, you will still need a sizeable savings to go through this time period without any financial worries.
Maternity and parental benefits in Canada:
The basic maternity benefit rate in Canada is 55% of the average insured earnings for a period of up to 15 weeks with a cap of $435 per week. The same rate applies to parental benefits, but for a longer period of up to 35 weeks. Parental benefits applies to both biological and adoptive parents. Either parent can collect the benefit or they can divide it between them. Parents in a low income family (earning less than $25,921) may also be eligible for a Child Tax Benefit.
But with a much reduced income and increased expenses, you may find yourself struggling to cover your expenses towards the end of your leave. So what are your options? How can you prepare yourself for maternity leave? Here are some tips that you may find useful:
Start saving as soon as you plan to have a child:
Once you have planned to have a child, start saving for the day by incorporating additional savings into your household budget. Call it your “maternity fund”, and do not touch it until your baby comes along. To make sure that you won’t touch it, open a new bank account that is not connected to your debit card, and deposit the money in there. To save enough money, you should try to start saving at least a year in advance.
Prioritize your needs:
Create a list of what you need and what you can do without. Rank the things that you need by their importance. That way, you will have a clear idea of what needs to be paid immediately and what can wait. For example, utility bills and the mortgage have to be paid, while eating out and entertainment can wait. Setting spending priorities can help you sail through these lean times with relative ease.
Curb your expenses:
After your leave starts and your income decreases, another way to help cover your monthly expenses and still have enough to last the full duration of your leave is to cut back on your spending. Give up your extra indulgences like small treats, and fast food, and buy only things that you absolutely need.
Find a source of extra income:
Being on a maternity leave doesn’t mean that you are unable to work. The internet provides many opportunities for stay-at-home moms and would-be moms to make an income. Such jobs might include freelance work, selling handmade goods, graphic design projects, or selling your unwanted items online to name a few. You may not be able to make as much as you were making at your full time job, but it can help to have a little extra money in your pocket during your maternity leave.
With a little bit of planning, you can afford to take maternity leave. Budgeting for your upcoming time off is essential when you know you’ll be living on a reduced income. Need help budgeting for maternity leave? Check out our online resources for tips on how you can learn to live within your means.