How To Budget Effectively During Maternity and Paternity Leave

Taking time off work for maternity or paternity leave can be a very happy and exciting time in your life, but it can also be financially challenging. With a reduction in income, it’s essential to plan ahead and manage your finances carefully to make the most of this special period. There’s lots to think about in terms of budgeting, let’s look at how to manage your money effectively and what financial support is available.

Understanding Benefit Entitlements

One of the first steps in budgeting during leave is understanding how much money you’ll be receiving during your time off.

In the UK, you are entitled to Statutory Maternity Pay if you meet the eligibility criteria, which includes having worked for your employer for at least 26 weeks before the 15th week before your baby is due. SMP is paid at 90% of your average weekly earnings for the first six weeks and then at £187.18 per week, or 90% of your average earnings (whichever is lower) for the remaining 33 weeks.

Fathers and partners may be eligible for Statutory Paternity Pay if they meet the necessary criteria. SPP is paid at £187.18 per week (as of April 2025) or 90% of your average weekly earnings (whichever is lower) for up to two weeks.

Beyond the statutory pay, parents may also be entitled to unpaid leave or employer-specific maternity/paternity pay (this will vary by company). It’s important to confirm the details of your specific entitlements with your employer.

If you qualify, also check if you are entitled to Statutory Shared Parental Pay (ShPP), which allows both parents to share up to 50 weeks of leave and 37 weeks of pay, offering more flexibility.

Review Your Income and Expenses

Once you know how much money you’ll be receiving, take a closer look at your household’s monthly income and expenses. You are likely to find that your income will be greatly reduced while on maternity/paternity leave.

• Note the amount you’ll receive from SMP or ShPP, as well as any additional sources of income, or any savings that you may have. 

• List your essential expenses, such as rent or mortgage, household bills, food shopping, transport, and childcare if applicable. Understanding what’s non-negotiable can help you prioritise spending.

• Review any non-essential or discretionary expenses, such as eating out, subscriptions, and entertainment. Consider whether you can cut back on these during your leave.

• Create a spreadsheet to track all your expected income and expenses. This will help you identify any gaps in your budget or areas where you can save.

Create a Budget and Stick To It

Once you’ve reviewed your finances, it’s time to create a budget. This will help you manage your money and avoid any surprises. Keep an eye on your spending, especially in the first few weeks of your leave when you might be adjusting to the new routine.

If you’re used to a higher income, it can be hard to adjust to a reduced income; all of those tiny treats you didnt think twice about before might now have to be thought about. Try to set realistic financial goals for yourself and your family. This might include reducing unnecessary spending, choosing different options in the weekly shop, or cutting back on travel. Everyone will have different preferences of where to prioritise spending, and what they are willing to sacrifice, 

If you don’t have an emergency fund yet, this could be a good time to start one. Even setting aside a small amount each month can provide you with peace of mind if unexpected costs arise.

Look at Available Government Financial Support

The UK government offers several financial support options that can ease the financial strain during maternity/paternity leave:

Child Benefit

Families with children under 16 (or 20 if in full-time education or training) can claim Child Benefit, which is currently £26.05 per week for the first child and £17.25 per week for each additional child.

Universal Credit

Depending on your circumstances, you may be eligible for Universal Credit, a means-tested benefit that could help with living costs, including housing and childcare.

Tax-Free Childcare

If both parents are working and your child is under 12, or 17 for children with disabilities, you may be eligible for Tax-Free Childcare. This scheme gives you up to £500 every three months (or £1,000 if your child has a disability) to help with childcare costs.

Maternity Grants

If you’re on a low income, you may be eligible for the Sure Start Maternity Grant, a one-off payment of £500 to help with the costs of a new baby.

Cutting Costs During Maternity/Paternity Leave

As your income is likely to be reduced, consider the following ways to lower your expenses during this period:

• Temporarily cancel or pause subscriptions you don’t need, such as gym memberships, magazines, or streaming services. Amazon Prime is an example of a subscription that can be cancelled and started up again very easily. 

• Save on food shopping by planning meals and shopping in bulk. Look at cheaper meal options or those that can be bulked out with less expensive ingredients, or less meat for example. For those really struggling, other help may be available such as food banks or charity schemes.

• Consider borrowing baby items from friends or family, or purchasing second-hand goods to save money. Babies grow quickly, and buying items second-hand can help reduce costs significantly. Lots of people sell clothing and other baby items on ebay, Vinted or Facebook Marketplace, and good deals can be had on bulk buys. 

• Take advantage of free or low-cost activities such as walking in parks, visiting museums, or attending local baby groups.

Managing Debt During Leave

If you have existing debts, it’s important to have a plan in place to manage them while on leave. If you’re concerned about making debt repayments, contact your lenders early. They may offer payment holidays or flexible repayment options during maternity or paternity leave. If possible, focus on paying down high interest debts (like credit cards) first. This will save you money in the long run.

Budgeting during maternity or paternity leave in the UK can feel challenging, but with the right planning and resources, you can manage your finances effectively during this important time. By understanding your pay entitlements, reviewing your income and expenses, looking for financial support, and cutting costs where possible, you can reduce financial stress and focus on your new growing family.