At a time when many consumers are scrambling for cash, working parents face an added source of pressure: a squeeze on maternity-leave pay and time off.
Employers are cutting back on post-childbirth pay for mothers and offering shorter leaves, on average, for both moms and dads, compared with a decade ago. This comes despite research showing attentive nurturing has particular developmental power in a baby's first year, and that longer leaves can ease postpartum depression in some mothers. The pattern heightens the need for parents to plan carefully for time off post-childbirth.
Only 16 percent of employers offer full pay for childbirth leave, down from 27 percent in 1998, based on a nationally representative sample of 1,100 employers by the nonprofit Families and Work Institute. The average maximum length of job-guaranteed leaves for new mothers shrank too, to 15.2 weeks from 16.1 weeks a decade ago; leave for dads fell to 12.6 weeks from 13.1.
Employers aren't deliberately targeting new mothers with pay cuts; rather, maternity leave has been caught in the crossfire over rising disability costs in general. Most maternity-leave pay in the U.S. comes in the form of disability pay, allotted for the six to eight weeks typically needed to heal after childbirth. New mothers are being hit by a cost-cutting move among employers toward paying only a fraction of full pay to workers on short-term disability, rather than 100 percent as was common in the past, as an incentive for employees to return to work as soon as they're able.
Nevertheless, the pattern risks pressuring new parents to race back to work too fast. New mothers' average time off work has already taken a nose dive since the early 1980s, the Census Bureau says; only 42 percent of working mothers took more than three months as of 2002, the latest data available, down from 54 percent.
For many parents, even three months isn't enough. Michelle Kwok, a medical resident, was only four weeks into a planned three-month leave with her first baby when she realized she needed more time. The California mother asked for an extension and used up sick and vacation days she'd saved, to eke out a total of six months. Fortunately, she and her husband had been living frugally and could afford the extra time.
But other dual-earner parents load up on debt. An online poll of 419 working parents conducted for this column by the parenting Web site UrbanBaby.com found that while many relied on a partner's income, savings or employer coverage to finance most of their parental leave time, about 23 percent used credit cards or loans not a wise strategy, financial planners say.
A better approach: "As soon as you know you're pregnant or even before, start stashing away money and start banking the days" of paid vacation or sick leave provided by your employer, says Jill Gianola, a Columbus, Ohio, financial planner.
Research your employer's time-off policies to see how many paid vacation or sick days you're allowed to carry over year-to-year. That time may be shrinking too: More employers are limiting year-to-year carryover to roughly two weeks from about four to five weeks a decade ago, says Carol Sladek, principal at Hewitt Associates largely because they want workers to use the leave each year for R&R.
To finance additional time off, consider setting up an automatic monthly checking-account deduction to a savings account. For her second child, Kwok and her husband banked her pay increase from her promotion to attending physician and lived primarily on his income as a product manager and photographer. While that meant bypassing the new cars, big house and pricey Jimmy Choo shoes she might have enjoyed, Kwok says, "the time with our children is more important."
Set a budget that includes $600 to $1,800 a month in projected child-care costs, based on the average in your area, and start living by it before the baby comes, advises financial planner Peg Downey. Although you won't need child care for a while, the savings will help cover time off and other new-baby expenses.