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How to budget for maternity leave

The prospect of a new baby coming can be an exciting time, but financially it could mean a change in your circumstances. Along with the extra costs associated with having a child, you are likely to face a drop in income during your maternity leave. So it is always best to plan ahead and take a look at your income and outgoings ahead of your bundle of joy making an appearance.

Here are some top tips on how to budget for maternity leave.

Understand your maternity package

You can’t really make a budget until you know how much money you will receive each month. So ask your HR department what maternity package is available to you.

Some companies offer full or half pay for anything from six weeks to six months. There are also staggered options where you start on full pay and then drop to half pay and then to Statutory Maternity Pay. Or you could simply be offered Statutory Maternity Pay for the duration of your leave.

Understanding how much you will get with Statutory Maternity Pay is also key, as it is calculated on a weekly, not monthly, basis. With Statutory Maternity Pay, you will receive 90% of your average weekly earnings before tax for the first six weeks. For the next 33 weeks, you will receive £148.68 a week or 90% of your average weekly earnings (whichever is lower).

There is also shared parental leave, which you could discuss with your partner. Of course, the options for shared parental leave will also depend on what your partner’s company will offer. Statutory Shared Parental Pay is £148.68 a week or 90% of your average weekly earnings (whichever is lower).

Know what benefits are available

Knowing how much money you have is key to any budget. Therefore, working out what benefits you can continue to receive from your company while on maternity leave and understanding what benefits you can apply for from the government when your baby arrives could make a big difference.

With your company, you will typically accrue annual leave while you are on maternity leave. Depending on when/whether you decide to return to work, this can be key, as you can use your annual leave to cover the gap between when Statutory Maternity Pay ends and when you return to work.

Most companies will also maintain payments for benefits that are part of your package, such as childcare vouchers and pension contributions, during the paid period of your leave, although this is always something you should check with your employer.

You will also be entitled to take advantage of ‘keeping in touch’ days: you can work for up to 10 days during your leave. The type of work and pay should be agreed with your employer, but it could lead to a small boost for your finances.

In terms of government benefits, once your baby is born explore whether you qualify for child benefit or tax credits. Information on this can be found on the GOV.UK website.

Identify your financial commitments

Right, now you have calculated how much you are likely to have coming in during your maternity leave, it is time to turn your attention to what you have going out.

Identify what fixed costs you will need to cover from your pay each month, for example mortgage/rent payment, utility bills, loan payments, mobile phone bill etc. Then look at whether you can cover these with what you have coming in and how much it will leave you with afterwards.

If you haven’t already merged finances with those of your partner, look at how some of the costs that you may have covered previously can be shared.

Another key thing to do is to reduce your debts. If you have a credit card balance that is outstanding, making only the minimum payments can be costly in the long run, so look at whether you can get a 0% balance transfer deal.

Finally, budget for the new arrival. Babies need very little in the first instance, but there are a few essentials that you will need to build into your monthly budget, such as nappies, clothes and milk.

Need to get your debt under control before your new arrival? Check out our picks for the best 0% balance transfer cards.

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