Northwestern Mutual: How to Manage Household Finances While on Parental Leave

Few moments in many parents’ lives are more joyful than the birth or adoption of their child. Ideally, the months following should be dedicated to quality family time and adjusting to all the changes a child brings—without thinking too much about household finances.

To make the most of parental leave, new parents can develop a financial plan that accounts for changes in income and new expenses, from diapers to doctor appointments. The following steps can help parents meet their financial needs during parental leave so they can focus on their growing families.

Assess benefits

Although parental leave is guaranteed in many cases in the United States, the law doesn’t require employers to provide paid parental leave. Still, some states and many companies offer some compensation during that time. The moment a person knows they’ll need to take leave, they should work with their company’s Human Resources (HR) department to determine the benefits their employer offers. Companies that offer paid leave may only provide a partial salary, and the length of leave may vary from a few weeks to several months.

Parental leave may also impact other benefits, like health insurance or retirement. Employees should discuss their options with HR as soon as possible to determine the best approach to time away, including taking sick leave or paid time off.

Build budgets

A family’s money decisions in the months leading up to a birth or adoption often determine their financial stability afterward. Saving as much money as possible before the arrival of a new child usually pays off in the long run. For some families, that might mean cutting expenses like dining out, streaming services, or travel. It’s a good idea to build savings for the parental leave period, as well as emergency savings and funds for the child’s future.

Parents may have to cover new costs like childcare, baby clothes, and medical bills on top of existing expenses like rent and groceries. While the budget leading up to childbirth or adoption may be slim, parents should prepare to spend much more after the child arrives. New parents may have trouble estimating new expenses, so it can be helpful to track costs for the first few weeks of parental leave and adjust the budget accordingly.

Consider opportunities for additional income

Changes in one’s family often come with unpredictable expenses. Sometimes, even individuals who plan and save meticulously may still need extra income to make ends meet during parental leave. In some cases, it may make sense to tap into investments and move some money into a high-yield savings account so it’s easily accessible. For immediate funds, parents may consider taking on side work that won’t take too much time away from their families.

The right employment fit depends on a person’s circumstances and skills. Some employers may allow employees to work from home part-time during parental leave. For example, people who work in certain fields, like graphic design, editing, or writing, may take on small freelance gigs during their leave. Some corporate or marketing professionals might consult for a few hours each week. Ideally, any work during parental leave should be flexible and leave plenty of time to spend with the new baby.

By carefully managing household finances before parental leave begins, parents can make the most of their time away from work to focus on the people who matter most.

Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company (NM) and its subsidiaries in Milwaukee, WI.

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Source: Northwestern Mutual

Contact: Don Klein, 1-800-323-7033