Parental leave and finances for your expanding family
Having a baby? Start panicking now?
Having a child, particularly a first child, is going to significantly change household finances. However, there really is no need to panic and with careful planning this can be the perfect opportunity to finally sort out your finances.
There is a raft of expenses that you are going to incur, ranging from setting up a nursery, buying the baby supplies you have spent years pining over alongside healthcare fees and hospital balances. If you are opting for a private hospital, even with the cover of Private Health Insurance, out of pocket expenses can be significant, sitting well in the hundreds, for an uncomplicated pregnancy and delivery). In addition there is also the likelihood of a reduction in incomes with one parent typically taking a period of time out of the workforce.
As with everything, the best strategy is to start planning as early as possible. If you are going to have a period supported only by one income post bub, start living off one income well before the baby arrives and devote all the second income to extra mortgage repayments or similar. This trial will give you a feel for coping with a smaller source of income whilst also giving you some breathing space on the mortgage front, should you not quite be able to survive off this one income. Additionally, if done over a period of time, you can take years off the life of your mortgage!
Work out your ‘costs’ ahead of time and include fees from your obstetrician, anaesthetists and paediatrician as well as your expected hospital payments. It can be easy to get carried away and overwhelmed with the magnitude of baby goodies on offer! As fun as it can be, you actually need very little of it, particularly in the initial stages as you are likely to be gifted a lot. Speak to the ‘mums and dads’ in your life to gauge what they consider the essentials and with this info, create your must-have list. As babies grow so quickly, play with the notion of preloved items. If the idea of second hand goods works for you, check out websites like Gumtree and eBay to see if what you are after is available – guaranteed, it will be at a fraction of the price. Friends or family who already have children may also have items that you can borrow or purchase.
The next step is to establish what benefits you may be entitled to - this will vary depending on your personal situation. Approach your current employer and/or your partner’s current employer to see what arrangements they action for new parents. Any accumulation of annual leave or long service leave will assist as an income source whilst you are away from work. Your next stop should be www.humanservices.gov.au where you will find the entitlements you can receive as new parents. This will include Parental Leave Pay, typically paid to the primary carer who (a) has met the requirements of a Work Test (or received an exemption) within the past 13 months, (b) has had a personal adjusted income of less than $150,000 and (c) will not be working for a period of up to 18 weeks to care for the newborn. This payment is currently $695 per week and is generally paid through your employer’s payroll over 18 weeks. Additional payments that you may be eligible for include (a) Newborn Upfront Payment for those receiving Family Tax Benefit and no Parental Leave Pay, (b) Dad and Partner Pay for parents taking up to two weeks unpaid leave and (c) Family Tax Benefit, which is an ongoing fortnightly payment that is income tested, based on your total family income and the amount and age of existing children in the household. Parenting Payment is designed as the main income support payment for individual low income earners who identify as single and caring for a child under 8 or partnered and caring for a child under 6.
Perhaps the most significant benefit for working families is the Child Care Benefit which is a payment to help with the cost of day care, outside school hours care, vacation care, pre-school and kindergarten. These fees can be in excess of $100 per day so the Child Care Benefit and Child Care Rebate can substantially reduce out of pocket expenses for the care of your children. Eligibility requirements include the basis of your income, the childcare supplier you use as well as the health of your child.
Before taking leave, plan your return to work strategy with your employer, as this will ensure your transition back to work, and subsequently access to dual incomes, a lot easier. If you have been an employee for at least 12 months your employer is required to enable you to return to your existing role as well as providing you access to 12 months unpaid leave alongside flexible working arrangements.
Having a baby doesn’t have to mean panic and financial stress. Plan ahead of time, seek out all the benefits you can possibly receive and most importantly, enjoy the period of pregnancy and welcoming your new one into the world.