For parents (or parents-to-be) the recently revealed Federal Budget will be of particular interest, as there were a number of changes made to parental leave.
Here is a summary of the changes:
- Up until now, parents were eligible to take up to 12 months parental leave with benefits paid out at 55 per cent of their earnings. Parents now have the choice of extending leave to 18 months, but that means taking a bit of a pay cut to 33 per cent of their earnings over that time period (a side note- you need to have worked 600 hours prior to taking leave in order to be eligible).
- Mothers are able to start their leave up to 12 weeks before baby is born, which is up from 8 weeks under the prior coverage
- It’s up to parents to decide whether the mother, the father or a combination of the two take leave; it’s one benefits cheque per household over the time period (there is no doubling up on payments)
“Don’t wait until your child arrives to plan your parental leave. It’s an expensive time in any household, because typically your income goes down and in many cases your expenses go up. In order to keep your household budget intact and avoid credit use, it’s wise to have a plan in place for your finances during your leave,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
Here are some considerations to help plan your leave:
Help with child care costs
It really depends on your situation, but having the option to take an additional six months off of work with paid parental benefits may be very helpful to parents. It can often help defray the significant costs of childcare, which are at their highest when a child is an infant. If care can be put off until the baby is a toddler, that’s one expense that will diminish.
Can you manage with less money coming in?
However, does taking more time with fewer benefits paid out month to month work with your monthly expenses?
“If you are opting to take longer off from work, make sure that you’ve got cash savings put aside, in the event that you have extra expenses that you aren’t counting on. Also stress test your budget before baby comes at your new, lower income to see if it is feasible to stay on your budget with less money,” says Schwartz.
If not, see if you can tweak your budget to accommodate the changes or use those criteria in deciding how long you can afford to be off of work.
Can you supplement your income?
If your employer tops up maternity leave, determine if their program will change in tandem with the new parental benefit coverage period. You may be looking at partial coverage or less money extended over that period.
Also make sure that you apply for any benefits from the Government (Federal, Provincial and Municipal) which could increase the cash flow at home.
There are provisions around part-time work. In some cases, you may even be able to take on a limited amount of part-time work to supplement your income without impacting your benefit payments.
Are you on leave and finding that the costs are more than you had counted on, forcing you to turn to credit to cover expenses? A better budget will help you regain control of your finances. Give us a call at 1-888-294-3130 or visit our online debt analysis.