How to Budget for Maternity and Paternity Leave

Congratulations! You’re going to be welcoming a brand new person into your family! Whether your new child is joining your family by birth or adoption, this is an exciting time for you and a time of significant change for your budget.

When you think about budgeting for a new child, clothes and gear — and what you might spend on them — may be the first things that come to mind. But in addition to your spending, one of the most significant financial decisions you may make in those first weeks and months has to do with your income.

If you’re hoping to take some time off to bond with your kid, to adjust to being a parent, and/or to recover from childbirth, taking that leave may have a very direct impact on your budget. So how do you plan for this? Here’s what you can do, step by step.

1. Guesstimate how long you hope to be on leave

You’re not trying to make a final decision here, but having an initial timetable in mind will  help you start thinking things through. You can always go back and revise your estimate once you have more information. 

Find out what your employer and government might provide. In the United States, benefits for new parents tend to vary by state. If there are two of you, talk about whether one or both of you will take time off. If it’s both of you, will you take leave at the same time, stagger your time off, or a mix of both?

Tip: If you plan to return to work after your leave ends, that will end up affecting your childcare needs, so you’ll need to budget for that later too.

2. Estimate how much income you’ll receive during your paternity or maternity leave

You’ll need to find out what portions of your leave would be fully paid, partially paid, or unpaid. Depending on who you work for and where you work, parts of your leave may be covered by your employer, state disability insurance, or other insurance. 

While the details might not be perfect, get enough information to help you estimate the total income you can expect to receive during your leave.

Tip: This is also a good time to get a sense of what kind of paperwork might be ahead of you when it comes time to actually claim things like disability or family leave benefits from your state or local government.

3. Project your expected expenses

While it can be hard to guess how much your spending will change when your household grows by a whole person, consider what might change. In addition to expenses for your new child (clothes, diapers, etc), you may spend less on transportation (no commuting), or more on food (too tired to cook?). There may be other unexpected changes too; it can be helpful to ask other parents you know about how their expenses changed when they first had a kid.

Tip: When it comes time to make your projected expenses official, update your budget in Goodbudget

4. Compare your expected income with your projected expenses

Just like in your regular budget, you’re hoping to balance the income and expenses here.

If you don’t think you’ll be able to save up much before your new arrival, focus on lowering expenses. If your projected food costs seem high, can friends bring you meals during the first weeks or months? They might want to show their love like this anyway! If clothes are taking a chunk of your budget, can you ask around for hand-me-downs? People often love to see new little ones wearing the same outfits their own kids once wore. Even if hand-me-downs aren’t available in your immediate circle, you may have luck checking out a local Buy Nothing group. 

If the whole budget needs a bigger shakeup, you might also consider thinking creatively about your housing costs, since they’re a big piece of the budgeting puzzle. Whether the goal is to have an extra person to split the rent or to have help caring for your new child, living with another person you trust could help to lighten the load.

If you think you’ll be able to save up some money before your kid comes, define your goal amount and make a Goal Envelope. That will allow you to track how much you’ve saved up, as well as give you a place to redirect funds from other savings envelopes that have become lower priorities to you. You should also decide how much you’ll save each month before your leave starts. Then make sure to set that up in your monthly Fill in Goodbudget!

Throughout the time before, during, and after your leave, keep an open mind and stay flexible. You won’t be able to anticipate everything that might happen and will need to make adjustments. That’s okay! Having sketched out a rough plan will help you navigate through this new season of budgeting — and this new season of life.

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1 thought on “How to Budget for Maternity and Paternity Leave”

  1. Adding a child to the family is such an investment! It would be great if more companies had better benefits regarding leave for having a baby. Still, we have come along way in the US at least allowing for staggering leave, etc. Thank you for giving us a framework to plan ahead for such a big and exciting change.


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