By Essie Bester
The arrival of a new baby is one of the best periods in a new mother’s life, but the extra financial pressure that comes with it could cause unnecessary tension. As a working woman it is important that you should educate yourself in time. Find out how to bridge and secure the income gap that could develop during your maternity leave so that you will still be able to service your expenses, insurance policies and debt. Learn to think like a master of prosperity, using the following hints:
Understand what income you are entitled to
According to Mohammed Goolab, member of the executive committee of the South African Reward Association (Sara), South Africa’s maternity policy and benefits compare well with those of many other countries.
In our country mothers are entitled by law to four months’ maternity leave. Employers are, however, not obliged to pay your salary during your maternity leave ─ only to keep your job for you. Charitable undertakings will pay three or four month’s maternity leave in full, others pay nothing, while still others pay something in between (perhaps 75%), says Goolab.
If your employer does not pay in full while you are on maternity leave and you contribute to the unemployment insurance fund (UIF), you qualify for a benefit from the fund, although it probably will not replace your total income shortfall.
According to the UIF’s online portal www.ufiling.gov.za the benefits are calculated according to a sliding scale and may vary between 60% compensation for lower-income contributors to 38% of the compensation for higher-income contributors. The Department of Labour uses the last four years you have worked to calculate the number of credit days you have. For every six months worked, you will receive a monthly benefit for a maximum of four months.
It is essential to talk to your employer’s human resources department. Make sure that you are absolutely clear about what your employer is going to offer you during your maternity leave. Talk about the period of time for which you qualify and the portion of your salary that will be paid to you during this period. It is possible that you could use paid leave with full or partial pay to extend the leave that you are taking.
Find out how your benefits such as medical scheme membership, group life and disability cover, and pension contributions will be covered. If your employer is not going to cover it, you must know how much you will have to shell out and make a plan to pay it. In a case where the employer does not pay in full, you must determine how much you are going to get from the UIF and whether this will bridge your income gap.
Consult your financial adviser and together with him make plans for paying the premiums for life, disability and retirement annuity policies. Find out whether you qualify for waiver of premiums or lower premiums during maternity leave. Some insurers offer an option for maternity interruption in terms of their income protection policy, which will allow new mothers up to four months’ financial relief on their premiums while they are on maternity leave. Make sure of allowances, tax credits and child benefits that you may be entitled to and claim them.
Get a headstart on your pregnancy financing by starting your time with annual leave before the baby’s arrival rather than taking maternity leave from the outset. You get your regular salary during your annual leave, which means more money in the pocket for those who do not get full pay during maternity leave.
Think big during the early months of your pregnancy
- Pay off your debt while still earning your full salary.
- Cut back on your luxurious lifestyle.
- Submit your UIF application early ─ it could take a few weeks to process.
Hospitals, health and your finances
- Decide on a gynaecologist that you can afford.
- Decide on a nearby hospital.
- Do some research on projected expenditure and consult your financial adviser.
Collect as much information as possible about the medical costs of a normal birth as compared to a caesarean, as well as pain treatment options. Experts advise that you ─ even if you have a comprehensive medical fund ─ look at maternity benefits and apply for gap cover (which requires a waiting period and 6-12 months’ payments before the benefits take effect). Also talk to your adviser about the total financial impact of a new baby.
Almost one quarter of all new parents have to incur debt
According to research by credit providers a large number of parents (one out of every four) use credit to cover costs while they take time off from work to care for their newborns. This happens in spite of the fact that more than half of parents saved money before they took leave.
Experts say that the main reason for this is that parents often underestimate the cost of caring for a new baby. Many new parents say that they were unprepared for the costs and were therefore anxious during their leave. Many also return to work earlier than planned because of worries about money. They usually have to keep to a tight budget in order to control costs. Others rely on their overdraft facility or take up a second job to make extra money.
Prospective parents should try to account for all costs regarding the care of a new baby, such as nappies, clothes and equipment beforehand. Talk to people who already have children to find out what essentials should be acquired and how much one should spend on it. Then draw up a budget and start saving.