One + One = Three

There is, perhaps, no more exciting time in a couple’s life than the months and days leading up to the birth of their first child. The anticipation is wonderful, the planning of the baby’s room detailed. If only people paid as much attention to the money side of the experience.

One of the first things you’ll run into with the arrival of a new baby is the loss of income associated with taking maternity leave. New moms can take up to 52 weeks off  with job protection. However, all that time off doesn’t necessarily come with a full paycheque. There are companies that offer a “top up,” but it’s hardly ever for the full amount of the before-baby pay, and it seldom lasts for the full year.

Employment insurance (EI) maternity benefits are calculated as 55% of your normal earnings up to a maximum of $45,900, which works out to a maximum of about $485 a week, before taxes.

But you won’t get that for the first two weeks of mat leave; your benefits don’t start until the third week. And since it’ll take about 4-6 weeks to get your first EI cheque (or deposit), you shouldn’t be counting on that money to make your mortgage payment or buy food.

The best way to test the mat leave income drop-off is to live on your mat leave income for the duration of your pregnancy. Put the difference away for emergencies, to buy the stuff you’ll need for baby, or to start an education savings plan. If you can’t swing it for the months that you’re preggers, you might want to reconsider taking the full year-long mat leave.

Just because you are guaranteed a year of mat leave doesn’t mean you should take it. You should only take it if you have planned for it and have the money you’ll need to make ends meet without going into debt.

Also think about which member of the family should take the most time off with baby. Traditionally women have done this. But when the woman is the primary breadwinner, the income loss to the family is felt doubly. Do the math to see who should take time off and how much, and how that will impact your financial situation.

Re-make a budget that balances to cover your costs while you’re off, including a whole bunch of new categories that incorporate baby’s food, clothes, personal care (diapers, shampoo, cream), medical, toys, activities and savings. Don’t forget the costs associated with actually getting the baby here: hospital rooms and parking.

The arrival of your newest family member should be a time full of joy and excitement. But you can’t expect things to run smoothly if you haven’t done the planning. If you fail to plan, don’t be surprised to find yourself knee-deep in poop!