To cope with unpaid maternity leave, mothers turn to credit card debt, emergency savings and side jobs
By Mike Brown
Although Pew Research has found that 82% of Americans support paid maternity leave for mothers, only 17% of all working Americans have access to paid maternity or paternity leave according to the latest state data. -Unis
The United States is the only developed country that does not impose paid maternity leave, and that is unlikely to change anytime soon, if ever.
Private employers don’t want to incur additional costs, especially if hardly any other company offers a competitive paid maternity leave policy, and the cost of a government-run program would be astronomical.
So faced with this reality, how do mothers fare financially during their unpaid maternity leave?
Credit card debt, emergency savings, side jobs and personal loans
Breeze, the company I work for, surveyed 1,000 American mothers who took unpaid maternity leave in the past year.
For mothers who did not purchase disability insurance before their pregnancy, 20% drew on emergency savings to cover costs during their unpaid maternity leave, which lasts an average of 10 weeks.
17% took on credit card debt, 11% took on a side job, and 9% took out a personal loan.
Only 11% said they were able to comfortably afford the expenses while on unpaid maternity leave, while 21% looked to their spouse or partner to shoulder the additional financial burden.
These were the short-term financial impacts of unpaid maternity leave.
In the long term, 34% of mothers had to delay paying off their student finance debt due to unpaid leave, 32% delayed setting up a savings fund, 32% delayed buying a house, and 29% delayed buying a car.
Mothers Also Worried About Child Development Due To Unpaid Maternity Leave
Perhaps the most concerning impact of unpaid maternity leave was that many mothers told us they were returning to work sooner than they would have liked because the financial pressure of unpaid maternity leave was becoming too heavy to bear.
Because of this early return, most mothers were either extremely worried or somewhat worried that this early return to work would have an impact on their child’s development.
Is disability insurance the answer?
With incredibly rare paid maternity leave, is short term disability insurance the most logical answer for mothers wondering how they will survive on unpaid maternity leave?
According to our survey, 40% of mothers purchased a short-term disability insurance policy before becoming pregnant, and 65% indicated that the policy provided adequate financial coverage during their unpaid maternity leave.
23%, on the other hand, said insurance did not provide adequate coverage.
Among this group, we found that the medium short-term disability insurance policy replaced 50% of income while respondents were on unpaid maternity leave.
However, consumer education appears to be a major obstacle when it comes to using disability insurance as a financial safety net against unpaid leave.
Among mothers who did not take out a contract, 33% knew nothing about disability insurance and 21% applied for it after their pregnancy, which is too late because the pregnancy will be counted as a pre-existing condition.
Another 16% mistakenly believed that they would be automatically eligible for maternity leave paid by the government or their employer.
With no perfect solution to alleviating the financial hardship caused by unpaid maternity leave, the best thing pregnant mothers and fathers can do is prepare well in advance.
And that means before pregnancy. Set a budget, find out what you’ve saved, capitalize on those savings, and find out if short-term disability insurance could help.
Bio: Mike Brown is Director of Communications at Breeze, a modern insurance company specializing in income protection through disability and critical illness insurance.
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