Bringing a child into your family is an exciting period of life. It's also a scary one, and a time that can be marred with financial distress -- particularly when it comes to parental leave. If you're expecting to be out of work for several months or longer, here are a few ways to prepare for that welcome, yet potentially stressful, change.
1. Review your company's parental leave policy
It's an unfortunate statistic that only 40% of companies offer paid parental leave as part of their benefits package. If you're expecting to go out on leave, be sure to get clarity on how much paid time your company will, or will not, be giving you. Keep in mind that in some cases, you'll need to have been employed for a certain length of time before becoming eligible for paid leave, so ask the right questions to ensure that you have your facts straight.
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Regardless of your company's policy, in most cases, you'll still be eligible to take the time off you need under FMLA, the Family and Medical Leave Act. But while this law does compel employers to give eligible workers up to 12 weeks of leave to care for a newborn, it does not require that they pay workers during that time.
2. Find out about short-term disability
If your company offers no paid parental leave, but has a short-term disability policy in place, you may be partially in luck. Under one of these policies, you'll collect a percentage of your paycheck -- usually somewhere in the 40% to 60% range -- for a limited period of time if an illness or condition (in this case, childbirth) renders you unable to work.
The length of your short-term disability compensation will depend on the specific policy at hand, and in some cases, the specifics of your birth. Unfortunately, short-term disability insurance is only mandatory in five states (California, Hawaii, New Jersey, New York, and Rhode Island), but this doesn't mean your company doesn't offer some sort of policy. Be sure to inquire ahead of time and know what to expect.
3. Bank extra vacation days
If your company doesn't offer a specific parental-leave policy, you may still have the option to get paid for at least part of your time off -- that is, if you're willing to use your vacation time. An estimated 18% of employers allow new parents to take time off under their general vacation policy, according to the International Foundation of Employee Benefit Plans.
If you know you're expecting a baby sometime in 2018, for example, do your best to not take any vacation earlier that year so that you get the maximum amount of paid time off once your child arrives. It also pays to find out if you're allowed to carry vacation days from one year to the next. If, say, you have three days left over for 2017, and you can carry them into 2018, it makes sense to do so and give yourself more paid leave when you need it.
4. Establish an emergency fund
Going out on parental leave means not just potentially losing out on income, but incurring the added expense of a baby. That's why it's crucial to establish a healthy amount of savings before you're out of work for a while. Ideally, your emergency fund should contain enough money to cover three to six months' worth of living expenses. This holds true even if you're not the sole breadwinner in your family, so be sure to have at least some savings available before your leave kicks in.
5. Rework your budget
If you're looking at an unpaid, or partially unpaid, parental leave, then you'll need to be more judicious about spending money during that time. It therefore pays to redo your budget in advance and cut expenses that aren't essential while you're out on leave.
For example, during your leave, you probably won't end up using certain services you normally pay for, like your cable plan or local gym. (After all, when you're adjusting to life with a newborn, there's barely time left over to shower, let alone work out or binge-watch your favorite TV shows.) Talk to those providers, explain your situation, and ask to suspend your service temporarily until things normalize again.
The more you prepare for your parental leave, the less financial upheaval you're likely to face while you're out of work. And when you're walking around in a perpetually sleep-deprived state, the last thing you want to deal with is money problems.
