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PREPARING FINANCIALLY FOR MATERNITY LEAVE
3/23/2017 8:16:25 AM
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Fund Library Q&A
Your questions about financial planning, investments, and portfolio management answered by an industry expert



By Robyn K. Thompson  | Friday, September 16, 2016


Q – We’re expecting our first child next May, and I expect to take maternity leave of 12 months (maybe more if the Liberal government follows through on their election promise to extend it to 18 months). I’m currently working full time, and have for a few years, so I’m wondering what we can do to prepare financially, and what kinds of benefits might be available to help ease the financial burden. – Terry M., Halifax, Nova Scotia

A – Welcoming a new member of the family is always an exciting time. If you plan on leaving the workforce for a year or so, you can ease a bit of the financial burden (which isn’t really all that heavy for a newborn), by starting a disciplined savings program during pregnancy, and ideally even before. You’ll need those funds during maternity leave, during which your income will typically drop. Save whatever you can, but ideally, set aside 20% of your after-tax income in the year or two before baby arrives.

And don’t just put it in what’s laughably called a “savings” account. Talk to a financial advisor about investing your savings in assets that produce a decent return. I don’t mean speculating or gambling, but perhaps solid, dividend-producing stocks or income funds. Set up a regular savings plan with your advisor, ideally, some sort of automatic pre-authorized weekly or monthly transfer, so that your saving becomes like another routine expense or withholding on your paycheque – invisible, in other words, until you start seeing the investments mount up in your monthly statements.

Get all your benefits

As for benefits, these don’t come automatically. Make sure you apply for Employment Insurance (EI) maternity and EI parental benefits, as well as the Canada Child Benefit.

According to the government, for most people, the basic rate for calculating EI benefits is 55% of your average insurable weekly earnings, up to a maximum amount. As of January 1, 2016, the maximum yearly insurable earnings amount is $50,800. This means that you can receive a maximum amount of $537 per week.

According to the government, you will stop receiving EI benefits in any of the following cases, whichever comes first:

You have received all the weeks of benefits to which you were entitled; or the maximum benefit period of 52 weeks has been reached; or the payment timeframe during which you can receive benefits has ended, as follows:

* EI maternity benefits can be paid for a maximum period of 15 weeks and must end 17 weeks after the week you were expected to give birth or the week you actually give birth, whichever is later; or
* EI parental benefits can be paid for a maximum period of 35 weeks and must end 52 weeks after the week your child was born or was placed with you for adoption.

Control credit

Another sure-fire budgeting tip that can save you thousands is to control the urge to splurge on plastic. During pregnancy and in baby’s first year, stay off credit. Caffeine and alcohol during this period are bad for baby’s health. And credit is likewise bad for your financial health. The last thing you want to deal with during that busy first 12 months are credit card balances carrying annual interest of 20% or more. Do not put more on your credit card than you can pay off fully every month. Better yet, put the card away, and use your debit card or cash for routine purchases. It’s a good way of forcing you to think ahead and control impulse buying. – Robyn

Robyn Thompson, CFP, CIM, FCSI, is the founder of Castlemark Wealth Management, a boutique financial advisory firm specializing in wealth management for high net worth individuals and families. Contact her directly by phone at 416-828-7159, or by email at rthompson@castlemarkwealth.com for a confidential planning consultation.

Notes and Disclaimer

© 2016 by the Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.

The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned are illustrative only and carry risk of loss. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Please contact the author to discuss your particular circumstances.

 
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