The arrival of a baby can be one of the most exciting events of your life. It tends to change your whole world, from your mundane routines to your life goals.
Babies also have a major impact on your finances – although we tend not to think much about money where children are concerned. After all, points out Sarah Wilshaw-Sparkes with a laugh, “If we only looked at children financially, we’d never have any!”
But there is one equation that New Zealand parents usually do face: should both parents go back to work or should one of us stay at home?
While there is a complex array of compromises for every family to face, the financial aspect does need to be considered. Wilshaw-Sparkes, co-founder of ProfessionElle, says that from a purely financial perspective there are a few important factors to keep in mind:
Will you spend money going back to work?
Childcare is relatively expensive in New Zealand and it’s not tax deductible despite being a work expense (“Do you think a man or a woman made up these rules?” Wilshaw-Sparkes asks).
Plus you need to factor in commuting, clothing, food and covering sick days for both your child and yourself. You may find the costs overwhelm your income entirely. Also, earning more can push your family beyond subsidy thresholds, so working can feel like a pointless exercise that’s robbing you of time with your child.
If you hate your job, plan to change careers after starting your family, or you can go straight back into your old job even after many years, you’re in a position where a career break will make far less of a dent in your career path and total earnings.
Is it worth paying to work?
When you add up the cost of a career break, the sums can be startling: a woman earning $65,000 who takes a five-year break misses out on not only her income and opportunities for promotion, but also around $67,000 in retirement income from missed Kiwisaver contributions*. The financial implications compound across a lifetime to generate a serious gap – if you want to keep working and can afford to, the long-term financial outcomes are in your favour.
That’s even with the ‘motherhood penalty’ – local research has shown Kiwi mothers tend to return to jobs that are lower paid and have fewer prospects, as well as experiencing a 17% pay gap when compared to fathers. “The whole thing is a trade off,” Wilshaw-Sparkes says. “Women also reassess their priorities and you may go into a different field or role.”
What can you do to minimise the financial impact of a career break?
If you decide to take a break from your career, you may be able to mitigate the financial hit:
Check whether your family is eligible for tax credits, childcare subsidies or any other support.
Look for ways to use your skills in a freelance or consultant capacity, if your industry makes it possible.
Even if you can’t earn any money, finding a way to maintain your knowledge or industry license can pay long-term dividends and provide current references. Consider professional development or short courses to boost your employability.
Don’t be hasty when cutting ties with your employer: “A return to work in general is easier when it’s to an employer you know and who knows you,” says Wilshaw-Sparkes.
Try to boost your confidence in any area where you’re feeling nervous: “A corollary of lower confidence is a willingness to accept lower pay,” she says, especially for mums re-entering the workforce. “Your pay rises will be off a lower base going forward.”
Still feeling guilty?
Ultimately, your decision about going back to work isn’t about money; it’s about intangibles like spending time with your children and how much you enjoy working. Either way, guilt tends to go with the territory: “We’re very good at beating ourselves up,” says Wilshaw-Sparkes.
“There is no easy answer – it’s all a compromise and people have to figure it out for themselves.”
*Calculated on 3% employer and employee deductions = $325 per month, in a balanced Kiwisaver fund returning 3.9% per annum and paying $150 in fees, retiring at 67.