I’ve spoken extensively about the start-up costs to have a baby, and shared my experiences in minute detail. But the capital costs are just one part of the baby equation. How do we manage our money when one or both parents have an extended break from the workforce, without (or with reduced) pay? 

This doesn’t happen by accident.

Start with knowing your numbers

If you want to know how to afford this period in your life, you need to know how much it costs to run your household. 

A solid review of your household budget is required.

This means assessing your current expenditure, removing anything that won’t be occurring during this period, adding in any new expenses that will become relevant. 

For example, it may be that you’re not planning to use your Pilates membership for 3 months postpartum but you know that adding an extra person to your private health insurance will increase that cost by $60 a month. 

Then, assess what’s going to happen with incoming money. Do you have paid parental leave? Does your partner? Are you considering a period of half pay? Do you have other leave entitlements? Will you qualify for the government’s paid parental leave or partner leave schemes? 

Crunch the numbers on your situation so that you know where you stand.

You may come to see that your budget balances with one income and/or with various benefits or entitlements. Perhaps you need to adjust your savings and/or investing, but you can make it work. 

However you might also be cash flow negative during this time, so you will need to rely on your assets (savings or investments) to ensure you don’t run out of money. 

For my family, our raw deficit was about $4,000 per month. This meant that in addition to the funds required to get through pregnancy and postpartum, we would need approximately $24,000 for a 6 month maternity leave period. Part of this would be offset by the government paid parental leave scheme.

During my first maternity leave, I qualified for the paid parental leave program but due to Centrelink being well, Centrelink, I had actually returned to work before I received a single dollar. Therefore going forward I was very conscious of ensuring we had the funds to manage this time ourselves, and we would get ‘paid back’ when any benefits were received. One less thing to worry about. 

Save or invest to reach your goal

Once you know what parental leave will cost you, take clear and decisive steps to accumulate the funds required.

If your goal is less than three years away, this means stockpiling cash.

If your goal is more than three years away, this means investing (and then converting to cash as the goal gets closer). 

Make informed decisions

If you know ahead of time what this period in your life is going to look like, you can make better decisions about what makes sense for your family.

This might relate to the juggling of resources, but it also might impact how you choose to allocate your precious time with a young family. It might be more economical and more aligned to your values to have a shorter parental leave period but work part time for the early years of your child’s life. Or that you would rather both parents take time off. Or that you can perform some trigonometry to qualify for two parents’ corporate leave schemes and government benefits and bank roll the whole experience with joy and without worry.

Whatever it is, doing the numbers and assessing what makes sense for you and your family will put you in a stronger position and avoid unnecessary financial shocks.