It takes women more than two years to bounce back financially after having a baby, leaving many fearful about their own financial security and nearly a quarter (23%) convinced they’ll never return to the financial position they were in prior to giving birth. A study of new and expecting parents by smart money platform, Credit Karma, found that one in four (26%) women go into debt to cover maternity leave – averaging £2,800 in borrowing – that’s a £560 increase from 2018.
Nearly a quarter (23%) of women now have no savings when they go on maternity leave, but the rise in borrowing has been accelerated by the rising cost of living. According to the study, parents who borrow are using the money to cover basic expenses like groceries (42%), bills (32%), baby clothes and supplies (26%).
In addition, women with student loans face severe interest charges on their loans whilst on leave and unable to work, which already has a significant financial impact. A new mother accrues an average of £1,770 loan interest in just six months of leave.
Women often see childbirth impact their credit score too, which can see them set back nearly £17,000 more than men across their lifetime in interest. This is because many (17%) rely on their (usually male) partner’s income to apply for any required borrowing during maternity leave, giving him a chance to build up his score as the owner of more credit agreements. This is debt owed by both partners, however, in this scenario, mums don’t get credit for demonstrating positive borrowing behaviours.
Akansha Nath, Head of Partnerships at Credit Karma UK said: “Women are often disadvantaged financially throughout their life, and the responsibility to give birth plays a huge role in this gender disparity. At a time when the cost of living is affecting most people, and every penny counts, it’s more important than ever that women take advantage of any support available to them.”
Akansha’s top tips for managing money and motherhood:
1. Move your money: If you’ve managed to put a bit of money away ahead of giving birth, make sure it’s working hard for you. Shop around for bank accounts with the best interest rates. Some banks even incentivise you for switching your account to them
2. Use your networks: Speak to other people who have children to find out what items you really need to buy and which (often costly) items aren’t worth the spend. They might even have some hand me downs for you, like prams or highchairs, which can end up being very expensive
3. Check your credit: If you think you’ll need to borrow money to cover parental leave, take stock of your finances by checking your credit score. You get a snapshot of all your outstanding credit, including overdrafts, credit card balances and mobile phone bills, so you can see how much you owe. Then you can search for the best deals available to you on things like credit cards and personal loans to see you through your time away from work
4. Consolidate your debts: You can use the information in your credit report to work out where any problems might arise if you need to borrow more money from your existing lenders. You might want to research changing credit card companies to get a better rate of interest, either for upcoming purchases or a balance transfer to pay down debt.
5. Claim what you’re entitled to: As well as statutory maternity pay or maternity allowance, you could be entitled to other benefits such as tax credits or the NHS Maternity Exemption Certificate for free prescriptions and dental care. To keep on top of bills, take advantage of any government support available, or if you’re worried about meeting rising household costs like energy bills, speak to your provider to see if there’s any flexibility, or options to stagger your payments while things are tight
