The arrival of a child brings a whole host of new challenges. As well as coming to grips with bottles and baby food, you’ll need to figure out the different types of leave and benefits available to you. To help you make the most of those precious early days with baby, we’ve put together a short guide to getting your finances in order for parental leave and maternity leave.
New parents in Canada can take advantage of various types of leave. You don’t receive your salary while you’re on leave. Instead, you may receive taxable benefits from the government. The main types of leaves and benefits are:
Maternity benefits (maternity leave)
Paternity benefits (paternity leave)
Parental benefits (parental leave)
The answer depends on a number of factors, including:
Your province or territory of residence
Your eligibility
The option you choose for the amount and duration of benefits
In Canada (except Quebec):
Then you’ll need to choose between two options:
There are a variety of specific circumstances that can affect the duration and amount of EI benefits. Visit the Government of Canada website to find out more and estimate your benefits.
In Quebec, two options apply to maternity benefits, paternity benefits and parental benefits:
Here’s what the two options mean for each type of leave:
Maternity benefits
Paternity benefits
Parental benefits
Once again, it’s a good idea to visit the government’s website to learn about the plans in detail and estimate the amount of your QPIP benefits.
In certain cases, you may be entitled to additional leave and benefits:
In Quebec, you’re entitled to additional weeks if:
Remember that you have the right to return to your position after maternity, paternity or parental leave. You can also continue participating in your employer’s benefits program (e.g., group insurance plan) while you’re on leave. Here’s how the payment works:
Expert tip: We recommend you keep your insurance coverage during your leave. What’s more, the arrival of a child is a good opportunity to take stock of your insurance needs and update them if necessary.
While you’re on leave, you won’t need to pay:
Even though your contributions are on pause, your leave will have no impact on what you receive from the government when you retire. Time spent on leave is excluded when calculating your benefits.
Does your employer offer a group retirement plan? In some cases, you may be able to keep contributing during your leave. Your employer makes contributions too. This allows you to continue saving for your retirement.
Although it can be difficult to contribute when your income is lower than usual, it’s an option worth thinking about. This will avoid:
Good to know: Some employers allow you to “buy back” months in which you didn’t contribute. However, this is an additional sum you’ll need to find in your budget. Contributing now will cost you less than buying back time later.
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There’s no big secret to making sure you’re ready for your leave and for baby’s arrival. To make sure you’re well prepared:
Don’t forget to include other expenses you’ll have during your leave, such as source deductions for your employee benefits and group retirement plan contributions. Next, think about:
Setting up a systematic savings plan is a painless way to make up the difference between your current earnings and your projected income on leave. Systematic savings can also help build up an emergency fund for unexpected events.
H3: RRSP contributions while you’re on leave
Though it isn’t always easy, try to earmark some money in your budget to contribute to your RRSP. This is particularly important if you don’t have a pension plan with your employer.
It’s better to reduce the amount of your contributions than stop contributing entirely. Because RRSPs allow you to defer paying taxes, it’s a strategy that can save you money.
It pays to wait: To benefit from greater tax savings, it might be worth waiting until you are back at work and receiving your full salary again before applying the deductions.
The arrival of a new child brings great joy, as well as big changes. With a little planning and some help from our experts, you can optimize your finances to make the most of this special time. We’re here to answer your questions.
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