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Mastering Maternity Finances: Expert Tips for a Stress-Free Transition

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Ready to master the financial intricacies of maternity leave? Join Kerry as she engages financial coach Lexi Smith in a conversation packed with practical advice and expert insights. Lexi delves into the challenges of transitioning from two incomes to one, stressing the importance of preparing a cash flow buffer and emergency fund ahead of time. She also discusses the pitfalls of buy now, pay later services and shares strategies on how mindful spending can alleviate financial stress during this critical period. Lexi's tips are not just about surviving this transition but thriving through it with less stress and more financial stability.

In the latter half, shift gears with us as we explore balancing work, family, and finances with actionable strategies. Learn how maximizing childcare subsidies can significantly impact your financial health, especially when having two children in daycare. We also uncover the financial benefits of different work arrangements, including the surprising tax savings when both parents work part-time. Personal stories enrich this segment, shedding light on the transition back to work and the merits of using offset accounts for financial benefits. Embrace the importance of living within your means while getting inventive with family activities to maintain your financial health and happiness. Tune in and walk away with a toolkit of strategies to navigate parenthood and finances seamlessly!

Thank you for listening to Parenting Genie Podcast. For more parenting information, visit our website https://parentinggenie.com.au. or follow us on Facebook, Instagram, YouTube, LinkedIn and Twitter @parentinggenie.
We value your feedback, so please feel free to reach out to us via email at admin@parentinggenie.com.au.

Carey Donohoe:

Hello and welcome. This is Carey from Parenting Genie, your go-to source for all things parenting From the joys of pregnancy to the challenges of raising a vibrant five-year-old. Every Tuesday, we dive deep into pregnancy and then on Thursday, we switch gears to cover everything about parenting. Rest assured, we're committed to providing you with loads of insights and expert advice every week. Okay, good morning everyone. It's Kerry from Parenting Genie. Hope you're all having a wonderful day. I've been really excited about today's podcast. We have a financial coach joining us today to discuss managing finances during maternity leave and upon returning to work. So let's all give a very warm welcome to Lexi Smith. Hi, lexi, hello, thank you so much for having me A pleasure and thank you for taking the time out of your day. We really appreciate it. That's okay.

Lexi Smith:

I think that parents have enough to worry about Money should not be one of them.

Carey Donohoe:

Oh, I know Well it is a big stress for a lot of families. But before we dive into all the financial talk, can you tell us a fun fact about yourself?

Lexi Smith:

Oh, fun fact. I was born in Sweden. I hate hot coffee, but love cold coffee.

Carey Donohoe:

That's weird. There you go, okay. Well, what's the best piece of financial advice you've been given personally?

Lexi Smith:

That is a really hard one to answer. I grew up as an only child, and so my parents spoke a lot to me about money, so I don't necessarily think it's one particular piece of advice, but that constant, the constant discussion and communication and open dialogue about money is a really big thing for me.

Carey Donohoe:

Yeah, that's good. Wonderful Well, Lexi. We'd love to hear about how families can navigate finances during maternity leave, but could you please outline some financial challenges parents face during maternity leave?

Lexi Smith:

Well, I think the main one that everyone's quite familiar with is dropping most of the time down from two incomes to one, or reduction in income if we're looking at like some paid parental leave. But that's a really big deal, particularly if a family is perhaps living week to week already and then so that can be really tricky, especially with the added cost of another, another person in the family exactly what steps do you recommend before maternity leave?

Carey Donohoe:

what? What can people do to sort of manage their finances before going on maternity leave?

Lexi Smith:

what not to do is dig your head in the sand about it um just being really clear on where you stand.

Lexi Smith:

um, you know, knowledge is power and if you can make some changes while you are still working, potentially while you are pregnant, then you can set yourself up for a less stressful maternity leave and potentially have a little bit more choice around when you choose to go back to work, if that's what you're doing, do you find a lot of families are stressed around finances when you know they are going on to maternity leave and dropping to one income?

Lexi Smith:

Well, it's the unknown, isn't it? It's? Everyone's situation is certainly different, but the impact of inflation is really hitting everyone hard, and so to then add maternity leave on top it means that the money has to stretch further, doesn't it?

Carey Donohoe:

it sure does. Yes, how can parents plan for unexpected costs?

Lexi Smith:

a cash flow buffer, or also known as an emergency fund, is really important, and I think in maternity leave there's really two uses for that. One is to potentially supplement the loss of income if your expenses are higher than the income that you're otherwise receiving, so that you've got a bit of a buffer to draw down on during maternity leave. And then the other one is to have an emergency fund for those actual emergencies that you were not expecting expecting. So it's about being really mindful and intentional with spending in the lead-up to maternity leave and then also continuing that in maternity leave, and I know easier said than done yeah, but the grass is green.

Lexi Smith:

The way you water it and paying attention to these things can make a really big difference.

Carey Donohoe:

I agree. I think it's really important to have that little emergency fund tucked away so to create emergency fund. A family's really needing to have that little emergency fund tucked away so to create emergency fund. A family's really needing to be mindful of putting a little bit of money away, each sort of pay over time, to create an emergency fund just earning more uh than you're spending uh and doing something with the difference and tucking that away.

Lexi Smith:

Quite often I see people saving money but then transferring that back out of savings. So that's not going to, over the long-term, build that emergency fund and if things are tight, if you're not able to, you know, have anything left over to stick in an emergency fund. What are we in control of? What can we change? I would say there is a limit to how much you can reduce your expenses, like you still need a roof over your head. There is no limit to what you can earn. Obviously, money is not everything.

Lexi Smith:

Kids are only little ones, you can always get more money you can't get more time, but if you can do these things, maybe even before pregnancy or early in pregnancy. That will make a future. You Thank you when you do have a little bit of a buffer that you've put together.

Carey Donohoe:

Yeah, great. What are some common mistakes you see parents making during maternity leave?

Lexi Smith:

Find our pay later is a pretty big one. That's a slippery slope. They market it, of course. I'm talking about things like after pay. They market it, of course I'm talking about things like after pay. They market it as a budgeting tool. I have seen cases where someone on maternity leave a quarter of their household income was going towards buy now, pay later.

Lexi Smith:

It's such a trap isn't it it's so it's hard to get out of as well, and typically, things that we're putting on buy now, pay later uh, wants, not needs. Yes, there are. I was having this discussion with someone else yesterday, um, and I gave the example like there might be a case where, yes, you just need to use it, buy now, pay later. The example was there is absolutely no money in the bank and the fridge has died. Yes, like that is not a want, that is a need, that's a necessity. Yes, yeah. So if you can close Buy Now, pay Later accounts, if you take anything away from this episode, if you've got a Buy Now, pay Later account, close it. Banks don't like to see them either. So if you're applying for a loan, um, it's not very favorably. Other things is where people have a credit card and they might be paying interest on that credit card, but they also have some money in the bank that they could actually use to pay that off. Um, what do you?

Carey Donohoe:

think of credit cards generally. Are they a trap as well?

Lexi Smith:

I am not, uh, completely anti-credit card. Uh, the reason being is I do use one myself. Um, I have never paid one dollar interest, though it is paid off in full each and every month, yes, um, so it depends on your experience and how disciplined that you can be with that. But in relation to credit card interest, if you're paying it, credit card's probably not the right option for you.

Carey Donohoe:

Yeah, and I would say you're really managing the limit that you have on the credit card as well, because that can just really blow out as well.

Lexi Smith:

Yeah, that you have on the credit card as well because yeah of course that can just really blow out as well. Yeah, and then for anyone with a mortgage, if they've got an offset account, um, actually using that offset account. I quite often see savings outside of an offset account um because I think you know we can earn a bit of interest over here, but they're paying more interest on the home loan. So being mindful of things like that as well.

Carey Donohoe:

Yeah, wow, many parents grapple with the decision whether to return to work part-time or full-time, mainly due to childcare costs. Can you break down the childcare subsidies between the full-time and part-time? Yeah?

Lexi Smith:

um.

Lexi Smith:

So the child care subsidy is based on income, so the more that you're earning, the less subsidy you're going to receive I quite often do calculations for my clients whereby we look at well, if you return two days a week, this is what your subsidy would be, this is what your child care cost would be. Three days this is what it looks like all the way up to five days, things like, um, and not so much in relation to child care subsidy, but other things, uh, to do with cash flow. Instead of having one parent home full-time and the other working full-time, what does it look like if you're both part-time?

Lexi Smith:

as an alternative, yeah, great idea um, yeah, looking at pros and cons to lots of different options to really empower parents to make a decision on what's right for them, because there is no just right way to do it.

Carey Donohoe:

It's what's right. Each family is very different, that's right, wow.

Lexi Smith:

Just on that childcare subsidy actually something that not all that many people are aware of and it doesn't apply to that many people either. But where you've got two kids in childcare, you do get a higher subsidy for the second child, depending on your income, when that older child goes to school. There is a period whereby you can still get the higher subsidy until that older child turns six, and so if you're not using after-school care or before-school care, there may be an opportunity to still enroll that child and maybe send them for half an hour once a term, like it doesn't need to be a big thing if you're not otherwise needing that care, but it does mean you'll get the higher subsidy for your younger child who is in childcare, and that can make a really, really big difference to financials.

Carey Donohoe:

Oh, definitely. What are you finding a lot of parents are doing now in terms of with the childcare? So are they usually like one parent working full-time, one parent staying home, or are you finding that, like you just said, you know, both of them are working part-time? What are parents generally doing today?

Lexi Smith:

We quite often see one full-time and one either at home or part-time. It's a lot to have young kids. I've got a four-year-old and now eight-year-old just turned eight, so I am in it, I understand that having two full-time parents is a lot, particularly at that age. I did some calculations the other day in relation to having a family income of $100,000 between two people, but only one person working, and then $100,000 between two people working and because of what we call the tax--free threshold the difference in tax in that scenario was about ten thousand dollars over over the year.

Carey Donohoe:

Well, what was the benefit? Was it one person working or both part-time?

Lexi Smith:

it was both both part-time, so you've still got the same amount of income. This assumed that they were earning the same amount on a yeah, yeah yes, um, but it meant that both parents could have the time with the child, which, like that's another benefit, isn't?

Carey Donohoe:

it and ten thousand dollars more, you mean saved from tax.

Lexi Smith:

Oh my god, wow, yeah, that is so. Pay attention to these things to understand your situation and and look at the pros and cons of different options.

Carey Donohoe:

Yeah, that should be the key takeaway from today oh, absolutely, wow, that's amazing, something really important to look at. And even, to you know, hire a financial coach, just you know, in the initial stages, to sort all of that out for you, you know which would be the best option. Yeah, how should parents evaluate their best option when considering their return to work? But we sort of just sort of covered that really. Um, what, what do you find parents are doing, you know, in terms of considering returning to work? Are they sorry, go ahead everyone is so different.

Lexi Smith:

Um, I know, for me personally, when I went back to work after my first, I jumped in straight five days. That was just what worked for me, what worked for our family.

Lexi Smith:

You know, I was really excited to go back to work um and then second time around it looked a little bit different for me because I had started my own business and so so it wasn't so much that I did a certain number of days. But long story short, my son actually did end up going full time to childcare when he was nine months old. But again, that was not my initial intention. But at the time, in the thick of it, that was the thing that we decided as a family that would work for us.

Lexi Smith:

Yes, we've also had times where my husband has taken a few months off to be at home, to be their home dad. So I think that it's good to be aware of what other people are doing. But if you are living off one income during maternity leave and then you do go back to work, you, depending on the situation, you could even look to pretend you didn't have that second income. So if you've done it, you know it's possible, um, and to do something really constructive with that second income and, you know, potentially save it or put it towards something pop it on the lifestyle creep ticking.

Carey Donohoe:

Yes, that's right, I mean, and it's know, the sooner you can sort of, you know, pay off that mortgage or get it down, you know it's much better, isn't it, than paying all that interest over 30 years.

Lexi Smith:

So that would be a better alternative really, wouldn't it, to try and pop that on the mortgage someone had asked me about offset accounts and we were just looking at the impact of offset accounts and in the scenario that we looked at, if we had twenty thousand dollars as an emergency fund just sitting in the offset account, it was going to reduce the time that it took to repay that mortgage by a couple of years and also save fifty thousand dollars in interest fifty thousand dollars in two, that's huge, isn't it?

Lexi Smith:

these little things along the way can make really big impacts.

Carey Donohoe:

Exactly, wow. Well, in your experience, what are some effective ways for parents to balance work and family life without compromising their financial health?

Lexi Smith:

Can you ask that question again?

Carey Donohoe:

Yeah, can you ask that question again? Yeah, in your experience, what are some effective ways for parents to balance work and family life without compromising the finances?

Lexi Smith:

it is a juggle, isn't it?

Lexi Smith:

to just juggle everything in general like I struggle to drink my two liters of water and my teeth as it is, but in terms of not jeopardizing your financial health, making sure you're living within your means and getting creative. Like, instead of maybe eating out, maybe it's looking at doing more picnics, and so you're still, yeah, enjoying that time with family. You're doing all the things. You don't need to be restricted to just staying home, but, yeah, really being creative with how you spend your time and how you spend your money, and seeing if there's ways that you can still get what you want but not have to pay as much or not have to pay for it at all. Might be going to the library to get books instead of, um, buying them, or that's inviting yourself to friends houses.

Lexi Smith:

yeah, yeah, that's right, of course, repaying the favour later on.

Carey Donohoe:

Yes, yeah, but just being really creative with things, exactly. Well, that would be a lot cheaper than going out to dinner with friends. Yeah, you could just swap each other's house around and cook dinner, so that would be a lot cheaper.

Lexi Smith:

And good for mental health as well, to be around people you know, friends and family.

Carey Donohoe:

Yeah, that's to be around people you know, friends and family. Yeah, that's, oh wow. So just tell us a little bit about your background and how you came in to be a financial coach and you know all of that.

Lexi Smith:

It started a long time ago when I was at school. I decided I wanted to be a financial planner when I was in year 9 or 10 at school.

Carey Donohoe:

Oh, that's good, you knew what you wanted to do.

Lexi Smith:

Yeah, long story short, what I thought I was getting myself into and what financial planning actually was were two quite different things. So financial planning is very, very valuable, but it's very focused on superannuation and insurance and investing, whereas what I love to do is the everyday money management, the cash flow, the income, the expenses, all of that stuff, all the good stuff, and so, after working in financial planning for 10 years, I decided to sidestep into financial coaching, which is so new in Australia.

Carey Donohoe:

It's incredibly popular overseas but, like most things, Australia is a little bit behind. Yeah, we are a little bit behind.

Lexi Smith:

So financial coaching is more accessible to families than financial advice. So you know, I do coaching for $19.95 per week. I also have one-off meetings for those who just want a bit of a sounding board, make sure they're on the right track. So that is, I guess, financial coaching in a nutshell, and a little bit of my journey as well.

Carey Donohoe:

Yeah that's amazing. Well, I think it really just does come down to the household spending and managing money. Like some people you know really don't have any idea of how to do that, or they may not have been taught by their parents or you know, so, yeah, it can just end up in a big snowball effect, you know, once you're going on maternity leave and then trying to navigate all of that, can't it?

Lexi Smith:

Yeah, and accountability is such a big thing. I know that if I just need to exercise, if I'm just exercising by myself, I'm not going to do it. But if I'm meeting a friend or going to a particular class, it's more likely to happen. And we know that having an accountability person dramatically increases the chance of us doing what we say we're going to do.

Carey Donohoe:

Yes, exactly, and I think today, you know, in our society, we seem to think that, you know, if we want something, we can just go and have it. You know, without thinking about the impact or the ramifications of all of that. It's you know. But, yeah, I think you know, without thinking about the impact or the ramifications of all of that, it's you know. But, yeah, I think you know what you're doing is really important because families, you know, don't want to end up, you know, broke or, you know, in a really hard situation, you know, once they've had a baby.

Lexi Smith:

Yeah, that's right.

Carey Donohoe:

Yeah, so where can people find you, lexi, if they're wanting some financial coaching or advice?

Lexi Smith:

Yeah, my website moneyvinecomau, because money doesn't grow on trees. And on Instagram I'm relatively active moneyvineau, Great.

Carey Donohoe:

Well, everyone, it's been a pleasure having Lexi on our podcast today and again, thank you so so much, lexi, for coming on and joining us today. Carey, here signing off, thanks for tuning in to today's episode. We're looking forward to hearing from you, so please don't hesitate to send us your questions and the topics you're eager for us to explore. Join us next time for more tips and stories that make parenting a joy. Until then, happy parenting and see you in the next episode.