Budgeting for an Upcoming Parental Leave

by Achieva Financial
Oct October 30

Here in Canada, workers are entitled to EI maternity and parental benefits. As the EI benefits do not cover your entire salary, it is important to budget for your parental leave.

What are maternity and parental benefits?

Biological mothers receive a maximum of 15 weeks of maternity benefits. Parental benefits are available to parents of either gender, and can be used to care for either a biological or adopted child. Canadians can choose either a maximum of 35 weeks of parental leave paid at 55% of their salary, or extended parental benefits, which is a maximum of 61 weeks at 33% of their salary. As well, new in 2019 is an additional five weeks of parental leave benefits when parents share the benefits, or an additional eight weeks with the extended parental benefits. 

Keep in mind that if you are self-employed you are not eligible for maternity or parental benefits, unless you’ve registered for EI special benefits, and have begun paying premiums. Once you’ve registered for EI special benefits, there is a 12 month waiting period before you can make a claim.

Saving for a New Baby

Children are expensive, and there will be expenses to plan for, both before and after your little one arrives. Consider creating a savings account dedicated to baby expenses and regularly transfer money into it. This will lessen the financial shock of paying for things such as a crib or car seat. Remember that you can buy many baby items secondhand to save money, such as baby clothes!

A few months before your baby arrives, start living on the income you will be receiving during your parental leave. This will prepare you for the realities of living on a reduced income, and you can put the rest of your salary into your savings, boosting your savings account for your upcoming leave.

Budgeting for Parental Leave

Before your new family member arrives, sit down and look at what your projected expenses will be during maternity and parental leave and reallocate your budgeted funds accordingly. Keep in mind that you may be able to reduce your expenses in some areas; for instance, one family member will not be working so you may be able to reduce the insurance coverage on a vehicle during your leave in order to save some money. You can also expect to spend less on work clothing while on parental leave.

It's also a good idea to review your workplace benefits to see what you will be entitled to while you’re away on leave. Some work places will top up your maternity or parental leave benefits, and it is good to know what health coverage you can expect during your leave.