How much will maternity leave cost you?

A couple of years ago I sat down and worked out how much money I would need to save to cover a period of maternity leave.

The result was...depressing would only just start to describe it. If I hadn't done my calculations then I would have had a hell of a shock and upset further down the line!

This is something that will affect anyone who plans or hopes to have children. If you think you'll be starting a family in the future then it's never too early to work out how a period of maternity or paternity leave will affect your income, and the sooner you're aware - the quicker you can start working on a plan to alleviate it!

Step one - Find out what your workplace offers

In the UK pregnant people are legally eligible for 52 weeks of leave. This sounds great, depending on when you start it you could have almost a whole year with your baby!

But that isn't 52 weeks at full pay. The legal minimum is 39 weeks at Statutory Maternity Pay or SMP, and this is broken down in two sections: 

• the first six weeks of maternity leave are paid at 90% of your average weekly earnings before tax.
• the other 33 weeks are paid at the lower of two options: 90% of your average weekly earnings before tax, or the Statutory Maternity Pay rate of £151.20. And remember, that's the lower, so if you earn £400 a week your employer is legally allowed to only pay you £151.20 per week instead.

Those are just the legal minimums, and while many companies will pay you above this there are also plenty who will go for that bare minimum.

Big companies will often have a copy of their family leave policy on their website, or on a staff intranet. If you search high and low and can't find it then you may need to email an HR colleague to ask for it.

If you don't work in a particularly nice place and you're concerned that asking for a particular leave policy will cause problems, then you're probably working for a company will offer the bare minimum. In which case assume that you'll spend most of your leave on £151.20 a week and plan accordingly. And yes, planning accordingly can involve job hunting for a more supportive employer!

One thing to keep in mind: Many companies will only offer you an enhanced maternity leave package if you have been working for them for a year before your due date. So if you're already pregnant and thinking of changing jobs you could lose out on a lot of financial support if you move. Read any policy document very, very carefully.

Step 2: Work out what you'll be getting

Now that you have your family leave policy information, get out your pen and paper and start doing some calculations.

For this post I am using what is offered by my employer, as I'm fairly sure that this policy is common across my sector. But again, see what you can find or get from your HR!

My organisation offers an enhanced maternity leave package for staff who have been employed at least 12 months before their due date. This package is significantly better than the minimum is it gives me:

• 8 weeks leave on full pay (yay!)
• 16 weeks leave on half pay PLUS Statutory Maternity Pay (SMP) (lower of 90% of your weekly wage or £151.20 a week).
• 15 weeks on SMP with no additions.
• 13 weeks unpaid.

For many women the last 13 weeks are the killer. Three months unpaid following on from nearly 4 months on just over £150 a week is unsustainable for many families, whether you're the main earner for your household or not. It's a real shock for many women, and that's why finding out your employer's policies early on is so important.

Step 3: Compare your current wages to your maternity pay

And now, time to get out your calculator! I'll go through the above entitlement  using my current earnings to show you how I got to my conclusion.

At the moment my monthly take home pay, after I've paid off my student loan, contributed to my pension and HMRC have had their cut, is £1758.66. This is post-tax, so my pre-tax income is well above the weekly earnings limit for SMP so I'll be getting the £151.20 rate.

Since the average month has 4 weeks, I've divided £1758.66 by that to make £440 a week (rounded up). Already we can see that the SMP rate is less than half my weekly wage!

The first 8 weeks are on full pay, which means I don't need to worry about covering anything there! Happy days!

Then 16 weeks are at half my pay (£440 / 2 = £220) plus SMP (£151.20). So £220 + £151.20 gives £371.20 a week. Times that by 16 and you get £5939.20. This isn't bad, and would certianly be survivable. But my normal pay for 16 weeks would be £7040, which means I'm £1100.80 short. A bit of careful budgeting should stop you dipping into the credit card, but for many it will be a worry.

With 15 weeks at the SMP rate of £151.20 we don't need to do any complicated maths here. £151.20 x 15 is £2268. Normally I would get £6600 during those 15 weeks, so I have a shortfall of £4332. Now that's a big drop for many families, and is where you'll need to start making a decision between dipping in to savings or going back to work, possibly before you're ready.

And finally the last 13 weeks are unpaid. Well for me that would leave me £5720 short! Again, a huge drop and not something that is sustainable in the long term.

In total my 52 weeks of maternity leave could leave me short by a whopping £11,152.80! Suddenly maternity leave looks more like a period of financial stress and having to return to work before you're ready.

Step 4: Work out what you can save

For me, I knew having a baby was still a few years away. Me and my husband had only just got married and had just bought our first house, so a baby was not a priority. This gave me plenty of time to get to grips with savings.

I chose to start saving £200 in a regular savers account. These 12 month accounts tend to have a slightly better interest rate than an easy access saver, but you can't access the money for those 12 months without a financial penalty. But if you know you won't be drawing on that money for at least a year then they can give you a little boost.

I also topped my maternity fund up periodically with some side hustle money from surveys and eBay. Half the time I forgot I'd done it so I'd have a pleasant surprise at the end of the year when there was more than I expected in the account.

But £200 may not be suitable for everyone, you might be able to save more, or may have to save less. The important thing is to START the savings while you're still some time away from needing them. The earlier the better. If you end up not having children, think of it as your future cruise fund!

Things to bear in mind

When you talk about maternity leave you'll hear others chip in with their tips for saving money, or making a bit extra to help pay for a few treats while they were off.

The worst one I've ever heard was one woman stating that she stopped her pension contributions every time she went on maternity leave! To her it was a no-brainer, it was one thing she could easily cut and it meant that she had one less cost coming out in her payslip.

However, this is a terrible idea. Sacrificing a year of your pension contributions can actually add several years on to the length of time you'll need to work before you retire. This is because your employer will often match what you are paying in, or contribute more. So if you pay in 5% your employer could also be paying in 5%, or even 10%, 12%, or maybe 15% if they're very generous. If you stop paying your contribution then they will stop paying their side too (they're allowed to!), so you're losing far more than the little bit that comes out of your wages.

It's also a good idea to set up a separate pot for baby costs, although you don't need to do this until you're closer to starting a family. Your maternity leave savings should be ringfenced specifically to support you while you're off work. Dipping into them to pay hundreds of pounds for a new pram or to set up your nursery could mean you have to go back to work weeks before you're ready.

And don't forget to sit down once a year and recalculate your costs. Your income may have gone up due to tax changes or a promotion, or it may have gone down because you've had less paid overtime or adjusted your hours. Statutory Maternity Pay also goes up in April, but generally only by a few pounds, certainly not enough to cover the gap you may be facing.

Lastly, I have calculated my maternity leave savings pot to cover my lost wages because I want to have opportunities to go out during my maternity leave and take baby to any activities or events that look fun. How much you want to cover is entirely up to you. Others may decide that they just want to cover their expenses while on maternity leave, in which case you need to work out how much you spend every month on your essential expenses and then save that instead. It's a smaller pot and therefore you may feel more motivated to reach it.

You should also discuss it with your partner. If they want to take shared parental leave then they'll probably face the exact same gap between paternity pay and their normal wage.