For most Mums to be, the difference between your monthly salary and maternity pay will be significant. With some careful thought and planning, you can reduce the impact on your finances.
Given this is a blog that is dedicated to Mums and Money then it is only natural that we will cover the topic of not only maternity pay but some top tips on how you can sustain some sort of normality when it comes to cashflow during your maternity leave.
1. Work out what your income will during maternity leave
From the moment your maternity leave commences the clock starts ‘ticking’ on your maternity pay. Every company will have different maternity pay offerings. One thing they will all have in common is that maternity pay will be less than a monthly salary. A sensible option is to work through all sources of income for maternity leave to understand your situation.
It is really important to get the complete picture of what you expect your income to be.
2. Check what your company’s maternity policy is
Some companies have extremely generous maternity packages and some will only offer the statutory minimum. If you have recently joined the company it is important to check that you have the length of service.
It is really important that you understand what these mean for your cashflow.
3. Don’t forget about Keeping in Touch Days (KIT)
I missed a trick on my first maternity leave with these. I didn’t take the time to understand the rules so I missed out on two weeks of full pay.
KIT days are where you can pop into work for a few hours and still receive a full day’s pay. If you are to be receiving statutory maternity pay, this is an additional two weeks of pay you could recieve.
4. Don’t forget about unused annual leave
Towards the end of your pregnancy will be counting down the days until maternity leave starts. Having said that, it is important that your official maternity leave does not start until as late as possible. Maternity pay in the UK is payable for a period of up to 39 weeks. If you are planning a 52-week maternity leave you are going to find yourself with no pay very quickly. This is why it is important to time the start of your maternity leave correctly. A good way to get around this is to take some annual leave before your due date to let you get some rest before the big day arrives and importantly add a few weeks on full pay to the start of your maternity leave.
At the end of your maternity leave, you may also have accrued some annual leave depending on company policy. This is another great way to top up the cash flow in those final few weeks before returning to work.
5. Try to save as much cash as you can before your maternity leave starts
In my experience this is easier said than done, especially if you already have children.
Now is the time to start calculating your income during maternity leave. The total of your maternity pay, any benefits you are entitled to, and any other income will indicate what you have at your disposal. It is now time to compare that to what you would get if you were on full pay. Even if you can manage with your reduced income during maternity leave I would still advise saving a little for emergencies that might happen. It is also a good idea to consider any monthly variations, especially towards the end of maternity leave when the amount of income will drop significantly.
If you are likely to struggle with the reduced income during maternity leave you will need to consider saving as much as you can before hand to avoid any shortfalls.
When our eldest was on his way I worked out to the penny the difference between what my expected cashflow was during maternity leave and what I really needed. The results were astounding however it gave me a savings goal to make sure I did not run into issues while I was on maternity leave.
The best way to keep your savings under control is to have them in a completely separate bank account, ideally with a different bank. You can then use your savings to ‘pay yourself’ each month during maternity leave.
If you are worried about spending your savings on setting up the nursery and buying equipment, read our comprehensive guide.
6. Check what your benefit entitlements are
The team over at Maternity Action are the experts on benefits for families. Please take a look on their page to understand what is available to you.
7. Don’t forget that a lot of your expenses will reduce
The type of things which you spend money on will change significantly during your maternity leave. If like me you spend a lot of money getting too and from work, paying for parking, buying coffees, buying lunches, and all of those other impulse buys which tend to accumulate during the lunch hour remember that these types of expenses should reduce.
8. Check any other unexpected sources of income
When we were expecting our twins I had forgotten about a ‘maternity payment’ which was listed on our health insurance.
Check any long-forgotten investments which you might be able to use to help supplement your cash flow during your maternity leave.
9. Review all of your household expenses
Whether you pool the money in your family or keep things separate, work through all of your expenses for the time you intend to be on maternity leave.
Challenge every single line of your expenses. I use the Box clever press budget planner when I am working through our expenses. For lots of families, this is the only step in the process they will worry about when really you need to start looking at what money you will have available in the first place.
10. Try not to worry
Easier said than done right? Things always have a way of working themselves out and everything being okay.
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