Mothers and Financial Planning
Mother’s Day 2022 inspired me to write this blog post on some of the financial aspects of being a mother.
Women who take time out of their careers to become mothers often find that they are held back, or pressure is placed on them to cut short their maternity (pregnancy) and parental leave benefits.
There are, of course, different family situations that will require an earlier than desired return to work. Financially, it may make sense for the mother to return to work sooner while a spouse who is not the birth mother stays home to care for the child. There may also be relatively high-income households where a nanny is employed.
I could go into all the different permutations of families and childcare, but for this post, I will discuss some of the government-approved options that are available to mitigate the costs of having a child. I will focus on Ontario provisions, although most provinces follow similar rules.
Leave versus benefits
A leave refers to a leave of absence. A benefit because of a child being born would be something like Employment Insurance (EI) that is payable, typically, to the mother.
Pregnancy vs. Maternity vs. Paternal vs. Parental
Pregnancy leave is available to the birth mother. Pregnancy leave, therefore, does not apply to adopting parents or parents who have a child through a surrogate.
Pregnancy leave is sometimes referred to as maternity leave, but in Ontario, that is not the correct term. Nevertheless, you will often see both terms used interchangeably. At the federal level, the EI benefits a pregnant woman or mother of a newborn receives are referred to as maternity benefits.
Paternal (paternity) leave does not exist in Ontario. Instead, fathers can take parental leave.
Pregnancy leave is an unpaid leave of absence from work of up to a maximum of 17 weeks that begins as soon as 17 weeks before the due date or as late as the day the baby is born. As the name might imply, it is only available to a pregnant woman.
Parental leave is also an unpaid leave of absence from work that begins only after a baby is born. Unlike pregnancy leave, parental leave is available to both parents. Also unlike pregnancy leave, parental leave is available to all new parents, i.e., adopting parents or parents who have a child through a surrogate, as well as to birth parents.
One parent is eligible for up to 63 weeks of parental leave. Typically, it begins for the birth mother immediately following the completion of the 17 weeks of pregnancy leave. The leave must be taken during the 78 weeks following the child’s birth or the child coming into the care of the parent(s). Examples that might cause the latter form of delay include adoption or treatment that requires the newborn to remain hospitalized.
As you may know, both parents can take parental leaves of absence. However, if both take parental leave, their combined periods must not exceed 71 weeks.
Having said that, employer policies or collective agreements may allow for longer leaves.
Income while on pregnancy or parental leave
Note that I have stated that these leaves do not require that the employer pay their employees who are away due to pregnancy or parental leave. Some employers will pay, but there is no obligation to do so. Instead, employees on leave may apply for Employment Insurance benefits.
Benefits while on leave
Whether on pregnancy (maternity) or parental leave, your employer must continue to pay for and maintain employee benefits. Included would be benefits like life insurance, pensions, extended healthcare, and dental care. If you as an employee pay for your own benefits or share the costs with your employer, then you also must continue to pay for them while on leave, although you have the option to cancel them if you wish.
Those who adopt children encounter several expenses in this somewhat arduous process. Adopting parents can document a variety of expenses that will allow them to claim a tax credit at both the federal and Ontario levels. The maximum federal claim is $16,729. At the Ontario level, the maximum claim is $13,274.
This is another expensive process. Prospective parents can have some of their costs reduced through the Medical Expense Tax Credit. Ontario and other provinces provide varying forms of financial support to would-be parents. Nevertheless, there are out-of-pocket expenses that may or may not be covered by private health plans, such as fertility drugs and genetic testing.
Canada Child Benefit
This is a tax-free benefit, the amount of which depends on several factors. Among those factors are the number of children in your care, the ages of your children, your marital status, and your Adjusted Family Net Income (AFNI). If your AFNI is at the lowest level, that is, under $32,028, you receive the maximum payment for each child, which is $6,833 per year ($569.41 per month) for each child under 6, and $5,765 per year ($480.41 per month) for each child aged 6 to 17. You can learn more and calculate your benefit here.
Canada Pension Plan child-rearing provision
Pension plans may not be top of mind for new mothers, but it is one thing to keep in mind when you are feeling you are undermining your CPP entitlement. Those who stay home or reduce their work hours to care for their children and are determined to be the primary caregiver have the option to “drop out” from the calculation of their CPP retirement benefits the years that the children in their care were between the ages of zero and seven. While certainly not exclusively so, this is often of most benefit to the mother.
As is often the case in this country, there are multiple benefits and credits that mothers, specifically, and parents, generally, can potentially avail themselves of. While you are getting ready for that anticipated baby, reviewing these and other benefits, credits or legal entitlements can help make these life-changing events a little more affordable.
This is the 147th blog post for Russ Writes, first published on 2022-05-09.
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Disclaimer: This blog post is intended for general information and discussion purposes only. It should not be relied upon for investment, insurance, tax, or legal decisions.
Photo by Ketut Subiyanto.