How to Budget for Maternity Leave

As the arrival of your new family member approaches, you’ll need to ensure that you’re budgeting for maternity leave. You’ll already be under a lot of stress as a new parent, and the last thing you want is to worry about your finances at the same time.

The government offers employment insurance (EI) benefits to help you during your time off work. This bi-weekly payment will help cover some of your expenses, but before you go off work, you must decide whether you will take 12 or 18 months of leave. This decision is often a personal choice but will significantly impact your finances.

Budgeting before maternity leave

Before you decide on standard or extended parental benefits, you must have a clear outlook on your finances. This is important because how much you earn relative to your expenses could impact your decision-making process.

Start by assessing your current financial situation. Compile a list of your regular expenses, such as your rent/mortgage, groceries, internet, etc. You’ll also want to add in any debt that you may have. It’s also good to factor in variable expenses, such as gifts and medical procedures. Once you’ve added everything, you’ll know your monthly baseline expenses. This is the amount you’ll need to survive on.

In addition, you’ll want to consider any upcoming expenses. You’ll likely need to make some one-time purchases, such as a crib, stroller, and car seat. However, there will also be ongoing expenses, such as diapers and clothes. Plus, it’s a good idea to budget for registered education savings plan (RESP) contributions to help pay for your child’s future education costs.

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Understanding Maternity and Parental Benefits in Canada

Maternity and parental benefits in Canada are very generous. That said, there are quite a few rules regarding eligibility and payouts. Once you understand how the system works, budgeting becomes easier.

Maternity and parental benefits eligibility

• You’re pregnant or have recently given birth
• You’re caring for a newborn or newly adopted child
• Your earnings have dropped by more than 40% for at least one week
• You’ve accumulated at least 600 insurable hours in the 52 weeks before your claim

Maternity benefits are only available to the person giving birth, whereas parental benefits are available to both parents. That means if you’re adopting, you’d only be able to claim parental benefits.

Maternity and parental leave eligibility period

• Maternity benefits: 15 weeks
• Parental benefits: Standard benefits last up to 40 weeks and are shared between parents. Extended benefits are good for up to 69 shared weeks.

Maternity and parental leave benefits

Maternity and parental benefits are based on your income. As of 2024, the payments were as follows:

• Maternity benefit: 55% of your weekly income, up to $668 per week.
• Standard parental benefit: 55% of your weekly income, up to $668 per week.
• Extended parental benefit: 33% of your weekly income, up to $401 per week.

Parental benefits can be shared between parents, but standard benefits only last up to 35 weeks for one parent. Extended benefits can be claimed up to 61 weeks by one parent. If you want to maximize your government benefits, both parents should take time off.

The maximum benefits are the same regardless of whether you take standard or extended benefits. Extended benefits are just reduced to last longer.

Should you take standard or extended parental benefits?

Deciding between standard or extended parental benefits is essential since you can’t change it once a week of benefits has been paid. That said, many factors can affect your decision, including:

• Projected income reduction
• Maternity leave top-ups
• Loss of lifetime earnings
• The time you want with your family

The easy answer to taking standard or extended parental benefits comes down to budget. If your partner is a high-income earner and the loss of income from one parent staying home doesn’t make a big difference, then taking extended leave could make sense.

Opting for extended parental leave makes sense if one partner gets top-up pay. In this case, your employer will still pay you a set amount in addition to what you’re getting from employment insurance.

Besides monetary gain, some people use parental leave to spend as much time as possible with their new child before returning to the workforce. It’s also a good time to analyze your career goals. Some people may consider switching careers as it may give them a better work/life balance.

While extended leave is nice, the loss of income can be burdensome for many families. Returning after a year off ensures you get your full salary again. High-income earners often opt for standard leave since their EI payments are capped. That said, you also need to factor in any potential childcare expenses.

Managing expenses during maternity leave

Once you decide on the benefits you’ll be applying for, you must prepare for the process. Hopefully, you’ve paid for one-time expenses, so that’s no longer something you need to worry about. As for your EI benefits, you should apply for them as soon as you’re out of the hospital, as there is a slight delay of about a week or two.

The idea is that if you’ve already financially planned for a baby, the income hit won’t be so bad. Yes, it’ll still hurt your wallet, but at least you’ll be prepared. Some additional ways to save include buying gently used clothing and toys. You could also get a subscription for diapers, as the cost can be significantly cheaper than buying a box each time.

Despite having an established budget, it’s important to note that your expenses will fluctuate. Don’t be afraid to review and adjust your budget. Checking your finances regularly is a good way to ensure you’re always on track and not going into debt.

You should also apply for the Canada Child Benefit (CCB) as soon as possible, as it could provide you with additional monthly income.

Final thoughts

Having a balanced budget during maternity leave is tough but manageable if you prepare yourself. That said, once you get things under control, you’ll need to start thinking about what your budget will look like when you return to work. Childcare and RESP contributions weren’t relevant before you had a child, but they’ll be essential shortly.