If you’re having a baby soon, you’ll be thinking about the birth, what type of parent you want to be, and the perfect name for your bub.
But it’s also important to consider how your decisions today will affect your financial health in the future.
Money expert and mum of two Lacey Filipich urged coupled parents-to-be to take a 30-year view when deciding how much time each person would take off paid work.
“The biggest mistake I see couples make is making short-term decisions based on who earns the most at the time,” Ms Filipich said.
“If a woman ends up taking five years out of their career to look after children, that’s going to affect their earning potential for life.”
Childcare costs should be viewed as coming from both partners’ wages, Ms Filipich said.
“It’s a very common situation where the woman will say, ‘I earn less so I’ll stay home, because if I went to work, child care would wipe out my wage’,’” she said.
Ms Filipich said parents who take extended time out of the paid workforce can take steps to keep their career relevant, such as networking, professional development or volunteering.
So, once you have thought about the bigger question of how you want your finances to look decades down the track, what steps should you take now to manage your money well in the short term?
Both parents-to-be should find out their employers’ parenting leave policy.
On top of any paid leave your employers offer, primary carers – who are mostly mothers – can receive 18 weeks’ leave at the minimum wage through Centrelink if they have an annual income of $151,000 or less.
Dads and partners can take a fortnight off and also receive the minimum wage.
The primary carer must take the initial 12 weeks in one block within the first year of the birth or adoption of a child.
They can then take up to 30 days of flexible paid parental leave within two years and employees need to come to an agreement with their employer about how it will work in their situation.
Gig workers and freelancers typically receive no paid parenting leave from their employer but are entitled to the federal government’s paid leave.
Ms Filipich said couples should consider their leave entitlements as a whole and work out the best way to split it for their family.
Many employers allow workers to take parental leave at half pay, which is a good option to smooth out your income.
Income versus spending
Once you know what your income will be during your time out of the paid workforce, you need to work out whether it will be enough to cover your expenses.
If there is going to be a gap, you need to start saving – and the sooner you do, the better.
“The longer your run up, the smoother the take-off,” Ms Filipich said.
She said your spending habits change after having a child and you might cut back on some things but add other expenses to your budget.
“Suddenly nappies are a big part of your grocery budget, but you’re not spending as much money eating out,” Ms Filipich said.
Financial adviser Gianna Thomson said business owners planning to take time out should determine how much money needs to remain in the business for ongoing fixed expenses.
If you plan to draw cash out of your business, you need to consider the federal government’s paid parental leave income threshold as at the last financial year, she said.
Ms Thomson said personal insurances are tough to access while on parental leave and working part time.
“If you’re yet to review life, TPD (total and permanent disability), income protection and trauma insurance, do it before the third trimester of pregnancy,” she said.