This comprehensive guide will teach you how to survive unpaid maternity leave by giving concrete steps to help you plan and prepare for this important time. It’s possible to successfully prepare for an unpaid maternity leave, and starting the process as soon as possible will help you maximize your savings and give you enough time to understand your options.
Here are several strategies you can use to make this transition smoother so you can enjoy your time with your new baby without financial stress.
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The most recent data from the U.S. Bureau of Labor Statistics show only 27% of civil and private industry workers and 28% of state and local government workers have access to paid family leave. That means most American workers will need to self-fund their family leave.
Here are several strategies to afford unpaid maternity leave. These steps are listed in order of timeliness, from steps to take when you find out you’re pregnant to what to do after giving birth.
If my client were preparing to take unpaid maternity leave, I would recommend they plan for the costs, taking into consideration all out-of-pocket healthcare costs, pre- and post-natal, and the obvious cost of lost income during maternity leave.
They should also consider childcare costs, whatever that may look like. Once the infant is six weeks old, they are able to attend a childcare facility? If the parents plan on doing this, I recommend touring at least three different locations and getting on their waiting list if they have one, which is likely.
To plan as effectively as possible, gather these expected costs, and create a savings plan. Is it an option to ask doting grandparents or guardians whether they’re willing to help out financially or with care for the child when the parents return to work?
Erin Kinkade, CFP®
Once you find out you’re pregnant, research your leave benefits at your job. Then, familiarize yourself with your rights under The Family and Medical Leave Act (FMLA), which gives eligible employees 12 weeks of job-protected unpaid leave to care for a child. You might also be able to use your company’s disability insurance or purchase your own policy for additional leave.
The FMLA requires covered employers to allow employees to return to their same job or an equivalent at the same location where they worked before leaving. Employers covered under this act are local educational agencies, public agencies, and private sector employers with 50 or more employees.
Once you know your eligibility for paid maternity leave, FMLA, or both, review your company’s holiday and sick time policy. Some companies allow you to use other types of paid PTO to lengthen your maternity leave. Others might allow it on a case-by-case basis or require you to use all your PTO before taking unpaid leave.
Use this information to strategize the best combination of benefits and leave to enable you to take as much paid time off as possible.
Once you strategically plan your time off for maternity leave, create a baby savings fund. Set up an automatic transfer every time you get paid, and direct an amount to a separate savings account.
If you save $120 for nine months, you’ll have over $1,000 saved for your maternity leave. If you double it to $240 for nine months, you’ll save over $2,100. While it might not replace your salary, knowing you have a separate savings account when your baby comes can provide much-needed peace of mind.
Create an estimated budget for your maternity leave, including the cost of housing, food, medical bills, groceries, and baby supplies. Health insurance might cover certain supplies, and if you have a baby shower, your friends and family members will likely contribute clothing and diapers if you include these items on your registry.
Once you know what your costs will be during maternity leave, practice living within that budget. For example, your baby budget might include fewer restaurant outings than your current lifestyle.
Every time you skip a restaurant meal while pregnant, divert what you would have spent to your baby fund. This can help you increase your savings and also help you transition to life with a newborn.
It’s important to continue to save for your future, so I recommend continuing to do that while also building short-term savings.
Erin Kinkade, CFP®
If you create a baby budget and realize you might not have enough money to cover certain expenses, you have other options. Research community resources and assistance programs that specifically provide aid to new mothers and babies.
For example, the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) provides nutrition assistance to pregnant and postpartum women, infants, and children under five. With WIC, mothers can purchase produce, formula, and other items they might not be able to afford otherwise.
If you’re working on adding more savings to your baby fund, consider buying some items secondhand instead of brand-new. You can find toys, clothing, and even nursery furniture in excellent condition on Facebook Marketplace, secondhand children’s stores, and mom-to-mom sales.
For safety reasons, consider buying certain items, such as car seats, new. Yale New Haven Hospital lists baby items that are safe to purchase used.
If you need additional funds during your maternity leave, ask your employer for any opportunities to work part-time or on a contract basis while at home. Depending on your skills, you can also earn additional income online by completing freelance tasks, such as virtual assistant work, transcription jobs, or graphic design.
Once you’ve adjusted to life with a newborn, you could earn money through babysitting, tutoring, pet-sitting, flipping furniture, and more. It can be challenging to balance work with caring for a new baby, but there is more opportunity than ever in the digital age to make money from home.
If you still need additional income during your pregnancy and maternity leave, consider taking out a loan. If you have equity in your home, you might be eligible for a home equity loan or line of credit (HELOC).
You can also take out a personal loan. Some lenders, including SoFi, our highest-rated lender for good credit, even offer family planning loans, which you can use to finance fertility treatments, adoption, and pregnancy.
The drawback to taking out a loan is that your debt will increase, and it might be challenging to make a monthly payment in addition to having a newborn. If you use a home equity loan or HELOC, you risk foreclosure if you can’t make payments.
Saving ahead of time and preparing for your unpaid maternity leave is the best way to minimize any negative financial impact from leaving work. If you don’t have savings going into your unpaid maternity leave, that can lead to you being in debt, which can be stressful while you have a new baby.
If you qualify for FMLA, you don’t need to requalify for your job benefits like your 401(k) when you return. You can even contribute more to your retirement fund if you’re able to when you return to work to catch up on contributions you missed during leave.
Overall, the key is to be prepared. Do your research, know your rights in the workplace, and strategize your leave to ensure you get the most time you can with your baby with the least interruption to your finances.
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