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How to Financially Prepare for Maternity or Paternity Leave in Canada

Introduction

Welcoming a new baby is a joyous occasion—but it comes with financial responsibilities that many new parents don’t fully anticipate. In Canada, both maternity and paternity leave provide financial support, but it may not cover all your expenses. Understanding how to prepare for this income gap is crucial for both parents.

This guide covers everything you need to know to plan financially for maternity or paternity leave, from understanding government benefits to budgeting, saving, and setting up the right insurance.

1. Understanding Maternity and Parental Leave Benefits in Canada

In Canada, maternity and parental leave benefits are available to all eligible employees through Employment Insurance (EI). Here’s what you should know:

  • Maternity Benefits:
    • Available for birth mothers for up to 15 weeks.
    • Paid at 55% of your average weekly earnings, up to a maximum of $668 per week (2025 limit).
  • Parental Benefits:
    • Both parents (birth and non-birth) can take parental leave.
    • Standard Parental Benefits: 55% of average weekly earnings, up to $668/week.
    • Extended Parental Benefits: 33% of average weekly earnings for a longer period (up to 61 weeks for one parent).

2. Employer Top-Ups: Know Your Benefits

Some employers offer top-up payments to supplement EI benefits. These top-ups can significantly increase your income during leave. Check your employee benefits package to see if you’re eligible.

Common top-up policies:

  • 100% of your salary for a set number of weeks
  • Graduated top-ups over time (e.g., 100% for 6 weeks, then 75% for the remainder of your leave)

3. Start Budgeting Early

Baby-related expenses can add up quickly. Your income may be reduced during maternity/paternity leave, so creating a detailed budget is essential.

Budget categories to consider:

  • Childbirth costs (hospital fees, prenatal care, baby gear)
  • Reduced income during leave
  • Child care costs after leave (if applicable)
  • Miscellaneous expenses (diapers, baby clothes, formula)

Tip: Track every dollar for a few months to understand your spending patterns. Use apps like Mint, YNAB, or a spreadsheet to manage your finances.

4. Build a Maternity/Paternity Leave Fund

One of the best ways to prepare financially for maternity or paternity leave is to start saving early. Aim to save at least 3 to 6 months of expenses before your due date. Set up a separate savings account to keep the funds accessible yet distinct from your regular accounts.

Strategies to save:

  • Automate savings: Set up automatic transfers into your leave fund.
  • Cut non-essential expenses: Limit dining out, entertainment, and other discretionary spending.
  • Sell unused items: Declutter and sell items you no longer need to raise extra funds.

5. Maximize Government Benefits

  • Canada Child Benefit (CCB): After your child is born, you can apply for the CCB, which provides monthly, tax-free payments based on your income.
  • Provincial Child Benefits: Some provinces offer additional support, such as the Ontario Child Benefit (OCB)or Alberta Family Employment Tax Credit (AFETC).

Tip: Apply for the CCB as soon as possible to ensure you don’t miss out on payments.

6. Review Your Insurance Policies

Now that you have a dependent, it’s time to review your insurance coverage:

  • Life insurance: If you don’t already have coverage, consider getting a policy that will cover your family’s needs if something were to happen to you.
  • Disability insurance: Helps replace lost income if you become unable to work due to illness or injury.
  • Health insurance: Baby-related health costs like prescription medications or dental care may not be fully covered by public health insurance, so consider adding private health insurance if you don’t have it.

7. Prepare for Post-Leave Financial Adjustments

Once your maternity or paternity leave is over, your family dynamic—and financial needs—will change. Consider these adjustments:

  • Childcare costs: Whether it’s daycare, a nanny, or a family member helping, factor in ongoing childcare expenses.
  • Revisit your budget: Adjust for changes in income, such as returning to work full-time or part-time.
  • Emergency fund: Start building an emergency fund if you don’t already have one.

Conclusion

Financially preparing for maternity or paternity leave requires careful planning and foresight. By starting early, building a robust savings plan, taking full advantage of government and employer benefits, and budgeting wisely, you can focus on your growing family without the added stress of financial uncertainty.

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