Check the background of this financial professional on FINRA's BrokerCheck.

JUN
15
The Financial Impact of Maternity Leave

In the news this week was an article about a ground-breaking new benefit offered to employees of Virgin Management in London and Geneva. Employees who have been with the company for two years or more may take up to one year (yes, you read that right), of family leave when becoming a new parent (fathers and adoptive parents included) to get to know their new child. As if this wasn't good enough, there is more. Not only are they entitled to a year of family leave, but they will be paid 100% of their base salary during that time. I know...I fell out of my chair too.

When asked about it, Richard Branson, Virgin's founder, said "As a father and now a granddad to three wonderful grandchildren, I know how magical the first year of a child's life is, but also how much hard work it takes. I'm delighted that we can offer this support to our staff so that they can enjoy parental leave to the full as we continue to our work in changing business for good."

 

The policy is groundbreaking, for sure. Not flawless, but setting a new bar that will hopefully carry over to the United States in short order. Think about this, more than 96% of countries around the world have nationally regulated policies on maternity leave. 25% of the countries with maternity leave policies even have paternity leave available at the national level. The countries that do not are the likes of Tonga, Papua New Guinea, and other underdeveloped countries. Oh, and the United States. Yes, that's right, the United States in the ONLY developed country in the world with no national maternity leave regulation. I guess it shouldn't come to a surprise then, that the first paragraph of this article came as such a shock.

 

So what are we to do about it? Today, more than twice as many families with children are made up of single parents and/or dual income households than there are single-income families with one spouse as a homemaker. We have become far more dependent on all income sources than we used to, and families struggle (and that is putting it mildly) when one takes maternity leave, and in some cases, as much as a 90% pay cut during that period.

 

While it does not appear that an overhaul of this (lack of) legislation is coming anytime soon in this country, there are some steps that we, as individuals, can take in our own lives to prepare for the joy of a newborn, from a financial and family leave perspective.

 

Know your benefits. How many of us have really read that large packet of benefits that the human resources department gave us on our first day at work? Be honest, you probably haven't. It is important to know what you do have, to know what you need to do. Some states have minimum short-term disability benefits that employers are required to provide. New York is one of a handful of states with such a requirement...though it is a modest $170/week. Other states, like New Jersey, have the Family Medical Leave Act, which provides job security (in the form of unpaid leave) for up to 12 weeks. Many employers offer short-term disability insurance that you can purchase through payroll deduction. Depending on the short-term disability company, and the state you live in, you may or may not have maternity coverage. AFLAC is one of the companies known to offer some maternity income protection. The available benefits will vary by state, but six weeks of income protection is standard for the maternity benefit on these policies. The important thing here is to understand what you have. Get the information, call the company, and see how it works.

 

Purchase private insurance. If your company does not offer short-term disability insurance, or does not offer sufficient insurance, you can purchase insurance for yourself. Now there is a catch here.  My experience is that very few of these policies offer a standard maternity benefit. They do, however, protect you should there be complications with your pregnancy or delivery. For example, let's say that you are put on bed rest for an extended period of time and are unable to work. Or your delivery involves complicated surgery that requires you to be off your feet for weeks after your child is born. Most short-term disability policies will provide coverage in these cases.  You may think that this coverage is unnecessary, but just like all other insurance, it is there for you if you need it. And should you need it, it will be a welcome relief to have an already stressful situation not become a financial disaster as well.

 

Take appropriate measures to save for the time you are off. You will know, approximately nine months in advance, that you are going to have a period of three months (or more) where you will be down an income. Instead of consuming yourself with the fear of what will happen, put a systemic savings plan in place. Gather an understanding of how much income you need to replace, and save a comfortable amount out of each paycheck during the pregnancy. I know, not rocket science, but 90% of the battle is making a plan and sticking to it.  An important note: make sure that whatever you do save goes into a savings account, and should not be invested in the market. We need it to stay whole, not risk loss, even if it means we only make $0.05 of interest during that time.

 

There is a good possibility that nothing I have mentioned in this article is going to seem overly revolutionary. I know that. The fact is that we live in a country where maternity benefits have not become a priority. So if you are passionate about this, as I know many of us are, then do one more thing. Get involved with an advocacy group, or contact your congressman, request a meeting, or simply write him a letter, where you talk about how important this is to you. Action is always better than reaction. Hopefully someday, we will catch up to the rest of the world and take the stress of income replacement during maternity leave off the table for new parents. After all, there is plenty else to be stressed about as a new parent. Why add more?

 

Sources

http://www.huffingtonpost.ca/2012/05/22/maternity-leaves-around-the-world_n_1536120.html

http://www.news.com.au/finance/work/sir-richard-bransons-new-work-policy-of-fully-paid-parental-leave-has-a-few-catches/story-e6frfm9r-1227392028316

http://www.prb.org/Publications/Articles/2003/TraditionalFamiliesAccountforOnly7PercentofUSHouseholds.aspx

http://www.wcb.ny.gov/content/main/offthejob/IntroToLaw_DB.jsp

http://www.babycenter.com/0_maternity-leave-the-basics_449.bc#articlesection2



RECENT POSTSCATEGORIES
Tell A Friend Tell A Friend
Connect with us on: Go to LinkedIn  Go to Facebook  Go to Twitter  


 
 
 Securities offered through American Portfolios Financial Services, Inc. Member FINRA/SIPC (FINRA/SIPC). American Portfolios Financial Services, Inc. and American Portfolios Advisors, Inc. are not affiliated with any other named business entities mentioned.

This communication is strictly intended for individuals residing in the state(s) of CA, CO, CT, FL, IL, KY, MA, MD, NJ, NY, PA and VA. No offers may be made or accepted from any resident outside the specific states referenced.
 


Check the background of this financial professional on FINRA's BrokerCheck.