How Non-Netflix Employees Can Plan For Maternity Leave

August 26, 2015

The issue of paid maternity leave was in the news again last week when Netflix announced it was giving most of its workers a full year of paid leave upon the birth or adoption of a child. I’d like to think this is a growing trend for American companies and that by the time I’m ready to take maternity leave (no, Mom, this is not an announcement), it will be the norm instead of news. But the reality is that most workers who receive a maternity leave still only get the FMLA-mandated 12 weeks off and then only sometimes with pay. This means that in addition to planning for the added expense of a new person in your family, having a baby includes planning for a temporary (or sometimes permanent) reduction in household income.

As my husband and I discuss our plans to start our family, finances are one of our key considerations. He’s an independent contractor so any time he takes off will be unpaid. I’ll have some pay but depending on how long I take off, I may also take some unpaid time.

We’d also like to keep the option open for one or both of us to eventually move to a reduced work schedule to minimize daycare but also to minimize the stress of maintaining a dual-income family. As such, we are already saving. Here’s how to figure out how much:

  1. Estimate the amount of lost wages for the leave: This is pretty easy. How long will you take off and how much would you normally get paid for that time? This is a good baseline number to set as your maternity leave savings goal.
  1. Add in expenses that will increase: The average cost of childbirth is $3,800, and while your insurance may cover a portion, make sure you know what your out-of-pocket obligations could be so that you’re not surprised with the bill. Unpaid medical expenses are quick to go to collections and can wreck your credit so be prepared to pay when it’s due. You’ll also have other doctor’s visit co-pays, diapers, and if your post-baby body isn’t quick to return to pre-baby shape, a shopping trip to buy some decent looking clothes while you work off the baby weight.
  1. Don’t forget health insurance: Be very clear on your employer’s short-term disability policy if you’re planning to use that for an extended leave. There’s a chance you could be knocked off benefits for part of your leave so you’ll need to pay a couple months of COBRA. That could be a big chunk of cash so factor that in.
  1. Think about your lifestyle: Life will never be the same after kids, which means your spending habits will adjust accordingly. While you’ll definitely see a decrease in funds spent on weekend road trips and spontaneous home improvement projects during those first couple months, you might see a spike in your take-out meal spending. You’ll probably be able to balance some of the added expenses against money you’d normally spend on other wants that go away during maternity leave, but it’s best to project it out as well to be sure.

So how do you save this money? One couple I know tried to live on one spouse’s income for the length of her pregnancy while saving all of her salary. This obviously required some frugality, but by the time she had her son, they were used to living on a lower income and she was able to take a full three months off without a blip to their long-term financial goals.

My husband and I simply have it as a separate savings goal, which we track during our monthly money meetings. Need a little help finding some extra money to save? Check out these (Mostly) Painless Ways to Save Money Now.