What you need to know about budgeting for maternity leave

Prepping for a new baby’s arrival might kick your nesting instinct into high gear, as you make sure everything is just right before the big day. One thing to add to your new-baby to-do list is figuring out how to budget for maternity leave if you’ll be taking time away from work.

Lauren Mochizuki, a nurse and budgeting expert at a personal finance blog, took time off from work for the births of both her children. Because she had only partial paid leave each time, she says a budget was critical in making sure money wasn’t a source of stress.

“The purpose of budgeting for maternity leave is to have enough money saved to replace your income for your desired leave time,” Mochizuki says.

But the question “How do I budget for maternity leave?” is a big one. One thing’s for sure—the answer will be different for everyone, since not everyone’s leave or financial situation is the same. What matters most is taking action early to get a grip on your finances while there’s still time to plan.

Before you get caught up in the new-baby glow, here’s what you need to do to plan and save for maternity leave:

1. Estimate how long you’ll need your maternity budget to last

To plan and save for maternity leave, you need to know how long you plan to be away from work without pay.

The Family and Medical Leave Act (FMLA) allows eligible employees up to 12 weeks of job-protected, unpaid leave from work per year for certain family and medical reasons, including for the birth of a child. Some employers may also offer a period of paid leave for new parents.

As you’re considering how to budget for maternity leave, you’ll need to estimate how long you’ll need your maternity budget to last. Mochizuki says to consider how much unpaid leave you plan to take based on your personal needs and budget. For example, you could find you’re not able to take the full period offered by FMLA after reviewing your expenses (more on that below) and how much you have in savings.

Even if your employer does offer paid maternity leave, you may decide to extend your time at home by supplementing your paid leave with unpaid time off, Mochizuki says.

Keep in mind that despite budgeting for maternity leave, your health and the health of your baby may also influence how much unpaid time off you take and how long your maternity leave budget needs to stretch.

As you’re trying to plan and save for maternity leave, make sure your spouse or partner is also considering what benefits may be available to them through their employer. Together you should know what benefits are available for maternity or paternity leave, either paid or unpaid, and how to apply for them as you jointly navigate the budgeting for maternity leave process. You can then decide how to coordinate the amount of time each of you should take and when that leave should begin. 

2. Babyproof your budget

When budgeting for maternity leave, make sure you review your current monthly budget to assess how budgeting for a baby fits in.

In Mochizuki’s case, she and her husband added a category to save for maternity leave within their existing budget for household expenses (e.g., mortgage, utilities, groceries).

“We treated it as another emergency fund, meaning we had a goal of how much we wanted to save and we kept working and saving until we reached that goal,” Mochizuki says.

As you plan and save for maternity leave, consider the following questions:

• What new expenses need to be added to your budget? Diapers, for instance, can cost a family around $936 per year, according to data compiled by Bankrate. You may also be spending money on formula, bottles, wipes, clothes, and toys for your new one, all of which can increase your monthly budget. And don’t forget the cost of any new products or items that mom will need along the way. 
• Will any of your current spending be reduced while you’re on leave? As you think about the new expenses you’ll need to add when budgeting for maternity leave, don’t forget the ones you may be able to nix. For example, your budget may dip when it comes to commuting costs if you’re not driving or using public transit to get to work every day. If you have room in your budget for meals out or entertainment expenses, those may naturally disappear if you’re eating at home more often while taking it easy with the little one.

3. Tighten up the budget—then tighten some more

Once you’ve evaluated your budget, consider whether you can streamline it further as you approach your maternity leave. This can help ease any loss of income associated with taking time off or counter the new expenses you’ve added to your maternity leave budget.

Becky Beach, founder of a personal finance blog for moms, says that to make her maternity leave budget work—which included three months of unpaid leave—she and her husband got serious about reducing unnecessary expenses.

Cut existing costs

As you budget for maternity leave, go through your existing budget by each spending category.

“The best tip is to cut costs on things you don’t need, like subscriptions, movie streaming services, new clothes, eating out, date nights, etc.,” Beach says. “That money should be earmarked for your new baby’s food, clothes, and diapers.”

Cutting out those discretionary “wants” is an obvious choice, but look more closely at other easy ways to save money. For example, could you negotiate a better deal on your car insurance or homeowner’s insurance? Can you better plan and prep for meals to save money on food costs? How about reducing your internet service package or refinancing your debt?

Find ways to earn

Something else to consider as you’re budgeting for maternity leave is how you could add income back into your budget if all or part of your leave is unpaid and you want to try and close some of the income gap. For example, before your maternity leave starts, you could turn selling unwanted household items into a side hustle you can do while working full time to bring in some extra cash and declutter before baby arrives.

Reduce new costs

As you save for maternity leave, also think about how you could reduce expenses associated with welcoming a new baby. Rather than buying brand-new furniture or clothing, for example, you could buy those things gently used from consignment shops, friends or relatives, and online marketplaces. If someone is planning to throw a baby shower on your behalf, you could create a specific wish list of items you’d prefer to receive as gifts in order to offset costs.

4. Set a savings goal, and give every dollar a purpose

When Beach and her husband saved for maternity leave, they set out to save $20,000 prior to their baby’s birth. They cut their spending, used coupons, and lived frugally to make it happen.

In Beach’s case, they chose $20,000 since that’s what she would have earned over her three-month maternity leave, had she been working. You might use a similar guideline to choose a savings goal. If you’re receiving paid leave, you may strive to save enough to cover your new expenses.

As you make your plan to save for maternity leave, make sure to account for your loss of income and the new expenses in your maternity leave budget. Don’t forget to factor in any savings you already have set aside and plan to use to help you financially prepare for maternity leave.

Once you’ve come up with your savings target, consider dividing your maternity savings into different buckets, or categories, to help ensure the funds last as long as you need them to. This could also make it harder to overspend in any one category.

For instance, when saving for maternity leave, you may leverage buckets like:

• Planned baby expenses
• Unexpected baby costs or emergencies
• Mother and baby healthcare

Budgeting for maternity leave—and beyond

Once maternity leave ends, your budget will evolve again as your income changes and new baby-related expenses are introduced. As you prepare to go back to work, review your budget again and factor in any new costs. For example, in-home childcare or daycare may be something you have to account for, along with ongoing healthcare costs for new-baby checkups.

Then, schedule a regular date going forward to review your budget and expenses as your baby grows. You can do this once at the beginning or end of the month or every payday. Take a look at your income and expenses to see what has increased or decreased and what adjustments, if any, you need to make to keep your budget running smoothly.

Budgeting for maternity leave takes a little time and planning, but it’s well worth the effort. Knowing that your finances are in order lets you relax and enjoy making memories, rather than being stressed over money.

Budgeting for maternity leave is a smart financial step when you’re expecting, but be sure you know all the ways to save money when you have a baby. 

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