When you’re expecting a baby, much of your time is spent planning for all the important changes that will occur when your new bundle of joy arrives. There’s a lot to prepare for….setting-up the nursery, purchasing those newborn baby items, creating a birth plan, and sorting out how you are going to afford to take maternity leave.
No matter how long you plan to be off work, you will most likely be living on a reduced income for part of your maternity and parental leave.
Therefore, it is important that you save money now, so you can cover all of your living expenses later.
Saving money before your maternity leave begins will help you enjoy the time off with your newborn, without having to worry about finances. Let midnight feedings, and not money-worries, be the only thing keeping you up at night!
I’ve been on maternity leave 4 times with my daughters. Each leave was different because I had different employers. I sometimes had to rely solely on government benefits to pay my bills.
To help you sort through the money-matters of becoming a new mom, I’ve written this article about how to save money for maternity leave. You’ll find my tips for saving money, an overview of what government employment insurance benefits you qualify for, plus how to calculate how much savings you will need to get you through to your baby’s 1st (or 18-month) birthday.
Wondering how long you should take for maternity leave? Check out this post – How to Choose Between the 12 vs 18 Month Parental Leave in Canada
There are affiliate links in this post. This means if you make a purchase through one of my links I may earn a small commission, at no cost to you. Read my disclosure policy to learn more.
How to Save Money for Maternity Leave
How Much Money Do You Need For Maternity Leave?
The amount of money you need to save is important. To avoid going into debt, you need to calculate the amount of money required to see you through a long stretch without your regular income.
During maternity leave your income may be significantly reduced, however, your expenses will remain the same. So the question is, how are you going to pay for all that “stuff” with less money? You can see why having some maternity leave savings is crucial.
If you are uncertain how much money you need to save for maternity leave, here is a quick calculation you can do:
INCOME – EXPENSES = SAVINGS NEEDED
INCOME
Employment Insurance Benefits (EI)
Top-up Pay from Employer
Canada Child Benefit
Investments
Other Income
– EXPENSES
Household Bills
Mortgage/Rent
Travel Expenses
Baby Items
Retirement/TFSA/Investment Contributions
= SAVINGS NEEDED
Monthly Income subtract Monthly Expenses = Savings needed per month of maternity/parental leave
As you can see from the model above, you need to calculate your income while on leave. It might start-off higher at the beginning of your maternity leave if you work for an employer who tops-up your employment insurance benefits.
For example, when my first two children were born, I taught for the Federal Government and my benefits were “topped-up” to match my full salary for 12 months! Lucky me, I know, since I didn’t require any extra savings while home with my girls.
However, with my last two babies, my employment had changed and I received only a few weeks of top-up pay before I had to rely just on EI benefits. If you are in a similar situation, then building a maternity leave savings fund is very important.
Do The Math
Begin by adding-up all sources of income you will earn while on leave. Contact your employer to determine if you will receive any top-up pay in addition to the employment insurance benefits you are entitled to.
Next, you need to add up your bills, expenses, and estimated new costs associated with becoming a parent. Make sure you cover the entire time-period you plan to be off work. If you don’t already have one, create a family budget so you know exactly where your finances stand.
The difference between your income and expenses is the money you need to save for maternity leave.
Read: Child Care Centre VS Home Daycare: How To Choose?
How Much are Maternity & Parental Benefits?
Government employment insurance maternity and parental benefits provide financial assistance to:
- women who are away from work because they’re pregnant or have recently given birth
- parents who are away from work to care for their newborn or newly adopted child
You could receive up to 55% of your earnings, to a maximum of $595 a week.
Maternity benefits
Maternity benefits are only available to a women who is away from work because she’s pregnant or has recently given birth. They cannot be shared between both parents. The mom receiving maternity benefits will switch to parental benefits after the first 15 weeks of leave.
Parental benefits
Parental benefits are available to the parents of a newborn or newly adopted child.
You have 2 options to choose from:
Standard parental benefits (1 year leave)
Extended parental benefits (18 month leave)
Your choice determines the number of weeks and the weekly amount you’ll receive.
If sharing, each parent must choose the same option and submit their own application to the government. Parents can receive their weeks of benefits at the same time or one after another.
Once you start receiving parental benefits, you cannot change options and have your bi-weekly payments adjusted. This doesn’t mean you can’t adjust the length of your leave from work with your employer though.
Maternity & Parental Benefit Overview
| Benefit name | Maximum weeks | Benefit rate | Weekly max |
|---|---|---|---|
| Maternity (for the woman giving birth) | up to 15 weeks | 55% | up to $595 |
Parental benefits follow maternity benefits – you can apply for both at once.
| Benefit name | Maximum weeks | Benefit rate | Weekly max |
|---|---|---|---|
| Standard parental | up to 40 weeks (but one parent cannot receive more than 35 weeks of standard benefits) | 55% | up to $595 |
| Extended parental | up to 69 weeks (but one parent cannot receive more than 61 weeks of extended benefits) | 33% | up to $357 |
Changes To Benefits During COVID-19
Some temporary changes have been made to the EI maternity and parental benefits program to help new parents affected by the pandemic. The following changes are in effect until September 25, 2021:
- the waiting period may be waived
- you only need 120 insured hours to qualify for benefits. You’ll get a one-time credit of 480 insured hours to help you meet the required 600 insured hours of work needed to receive EI
- for maternity and standard parental benefits, you’ll receive at least $500 per week, or more, before taxes
- for extended parental benefits, you’ll receive at least $300 per week before taxes
- if you received the CERB during the pandemic, the normal 52-week period to accumulate insured hours will be extended
Now let’s get to some effective ways to save money for your maternity leave.
Tips To Save Money For Maternity Leave
Make A Budget
Budgeting your monthly expenses is a good way to understand what your cash flow situation really is. Find out how much money you are spending each month so you can calculate how much maternity savings you will need.
If you know how much you pay for certain things, then you can make choices about where to cut back to save some cash before baby arrives.
For example, it usually shocks me when I realize I am spending $30 a week at Tim Horton’s! Just cutting that spending in half can save me over $60 per month!
If you need help making a budget, use our Family Budget Planner – it is everything you need to create an easy and workable budget!
After your budget is created, the next step in learning how to save money before having a baby, is to track your expenses.
Read: How To Budget For A New Baby: First Year Checklist
Track your Expenses
One of the best ways to become more aware of your spending habits, and where you put your money, is by tracking your expenses. When you are starting off, I suggest recording every item you purchase on an expense tracking worksheet, or using an online app.
Add up your numbers each week to help you understand where your money goes. After tracking each month’s expenses, add the totals all up to form your annual budget.
If writing things down manually isn’t your thing, there are some free app options like Mint. You can use it to track your credit card, debit card, and cash purchases so you have all that info right at your finger tips.
I find that tracking my expenses isn’t something I have to do forever. However, when I go through a big budget change, such as taking a leave from work, it really helps me to find places in my spending where I can trim.
Read: 11 Unique Baby Shower Gifts Under $100
Open a Maternity Leave Savings Account
One of the major ways to save money for maternity leave is to start a high interest savings account and fund it before you give birth. In fact, this saving strategy works for anyone wanting to save money on a fixed income!
When I was pregnant and had my bi-monthly pay cheque deposited into my bank account, I would subtract my mortgage payment and other fixed expenses (which I knew from making a budget) and see what was left. Then I would subtract what I needed for my important variable expenses that month (groceries, gas, back-to-school items etc) and see what I had left.
Then I would move money into my maternity leave high interest savings account and not touch it. The key take-away here is to NOT touch this money!
Often times, seeing extra money sitting in your day-to-day chequing account gives you false permission to spend it. You need that cash in a separate high interest account until it’s required to pay the bills during your maternity leave.
Online high-interest savings accounts require you to transfer the money into your regular ATM account, which helps prevent you from spending it on the fly.
You can easily move your money into an online savings account from your usual chequing account. Once you know how much you can spare each pay cheque, set-up automatic transfers into your online account so you don’t have to think about it.
Keep at it, and you’ll have a nice nest-egg when the stork arrives.
EQ Savings Plus Account
EQ Bank’s Savings Plus Account is a great example of a high-interest savings account. It currently offers a 1.50% everyday interest rate* – well over the 0.01% to 0.05% offered on regular savings accounts today.
EQ Bank is the online-only institution of Equitable Bank, and is insured by the Canada Deposit Insurance Corporation.
It comes with no monthly fee, free transactions, free electronic money transfers, no minimum balance, free mobile cheque deposits, free online bill payments, and free Interac e-Transfers® per month. The interest rate is calculated daily on your closing balance and paid monthly. The maximum balance you can hold in your account is $200,000.
EQ Bank also recently introduced TFSA and RSP accounts with high interest rates.
Adopt A New Mommy Lifestyle
To help you find extra cash to save-up for your maternity leave, try adopting the new-mommy lifestyle early. Trust me, once your baby is here, your priorities and free time are going to shrink faster than your postpartum waistline.
Your life will be filled with a new kind of wonder, but there won’t be as much time for pricey lifestyle habits. Cut down on things such as pedicures, manicures, haircuts, eyelash extensions, cable, gym & yoga memberships now to help you live comfortably during mat leave.
Here are a couple of easy things you can do to save money (remember the little things add up to a lot over time):
- Cut Cable – Really, how much do you watch cable tv?! During the pandemic, we realized what a huge waste of money cable was (about $100 per month) since the entire family only watched Netflix ($11 per month) or Amazon Prime.
- Make Meals At Home – Making quick and nutritious meals is so important when you have a new baby, so why not practice easy meal-prep now and save lots of money by not eating out at restaurants. I am definitely not a super-organized, meal planning type of person but I bought an instant pot before my last baby was born and it is worth all the hype.
We can make stews, soups, steamed rice, pulled pork, desserts, pasta, vegetables…. pretty much everything you can imagine!
I use the instant pot A LOT, and it helps our family cut the cost of buying take-out or going out to eat.
- Cut Memberships That You Don’t Use – I’m all for getting exercise, but don’t spend money on memberships you hardly use. Cancel gym memberships, yoga memberships, and spin class memberships – opting instead to run, bike, or workout at home. Lots of gym clubs will let you put a “pause” on your membership if you are having a baby.
Cutting memberships that you don’t use can add up to over $800+ in savings per year.
Earn Extra Money
Earning some extra money, on top of your income, is a good way to save for maternity leave! Depending upon what side-hustle you choose, it could also be a strategy you keep-up once your newborn arrives.
I started this blog when my last daughter, Quinn, was born and I now earn some extra money from it. If you have a skill or talent, and can find a way to turn it into a part-time business, the extra cash can help you get through your maternity leave.
I know new moms who have started doing freelance work, photography, pet-sitting, online tutoring, and refinishing furniture to stay at home longer with their kids.
Read: Best Baby Strollers On A Budget
Use a Cash Back Credit Card (And Pay It Off)!
My cash back credit card gives me cash back for every purchase I make, with no annual fee. I use it to buy almost everything I purchase and then use the cash I earned to pay off part of my bill. In a normal month, I redeem about $30 in statement credits. That’s $360 per year in free money!
If you use a credit card responsibly (ie pay off your monthly balance before you are charged any interest), it can be a great tool to help you budget and earn extra money when you are saving for maternity leave.
Sell Some Stuff in your Home
If you are like me, you have a basement full of “stuff” that you don’t use anymore. Why not dust it off and sell it?
You can make a few hundred dollars holding a yard sale or posting items on Facebook marketplace or Buy & Sell platforms.
One of my favourite ways to make extra money is to refinish or paint wood furniture and sell it. Painting a desk or dresser white and changing the hardware raises the value of the items quite a bit in the eyes of buyers. The only downfall I find is that I often fall back in love with the piece and want to keep it for myself!
How To Save Money For Maternity Leave: Conclusion
I hope these tips are helpful and will help you save money for maternity leave, and any other months when you are living on a low income.
Even after you return to work, continue to budget and use these strategies to save. Then, you’ll have more money to invest for your retirement and into your child’s RESP.
Enjoy your time home with your new baby!
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