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Financial Planning

Going back to work after having a baby

Combining work commitments with family responsibilities can be something of a balancing act. We look at some of the expenses you might encounter as well as some of the financial benefits.

The cost of childcare

For most parents, the first thing that comes to mind when contemplating returning to work after having a child is finding suitable childcare.

Recently released statistics show that in 2014 and 2015, 47% of couples and 51% of single parents with children under the age of 5 used paid childcare, and of those, 85% of couples and 67% of single parents were using childcare for work-related purposes*.

So unless you’re blessed with family who are willing and able to care for your little one for nothing, returning to work means you’re probably adding a new outgoing to your family budget.

The government offers two types of assistance to help families with the cost of childcare:

Child Care Benefit, where the fees charged by approved childcare providers are subsidised by the government. The number of hours of subsidised care you’re eligible for is dependent upon certain conditions, while the rate of your subsidy is dependent on your household income.

Child Care Rebate, which provides a rebate of up to 50% of your out-of-pocket child care expenses, up to an annual limit of $7,613 per child for eligible parents.**

But even with government assistance taken into account, childcare can be a considerable cost, and one that has risen significantly over recent years.

Statistics show that after any childcare benefit was deducted, the median amount spent per week per child was $162 for couple families and $114 for single parents in 2014 and 2015, which was an increase of 75% and 104%, respectively, on the amount spent in 2002 and 2003.***

The long-term view

If the cost of childcare will take up a large portion of your salary, returning to work might not seem to make good financial sense. But it’s important to take a long-term view of your family finances, as well as considering the more immediate costs. After all, your children won’t be in childcare forever!

By returning to work, you’re continuing to build your super, as well as maintaining your industry knowledge, contacts, and skills, which will help protect your ability to both earn an income in the short term and build your future earning capacity. This will help protect your family’s long-term financial security.

How to deal with less income

Whether you’re dealing with less income due to the cost of childcare, or because you’ve changed your working arrangements, and are returning in a part-time role, or in a job share, this will also impact upon your family’s finances. Here are some tips to help you adjust to the change, as well as some ideas to help keep your finances on track.

Ensure you have a budget, which sets out how your money will be spent, and look for any areas you can reduce your spending.

Combat the reduction in your employer super contributions by boosting your super with any windfalls you may receive, such as your tax return. Your spouse can also make contributions into your super, which could benefit you both financially.

What to do with additional income

If you’re returning to work when your children are at school this could mean a boost in your household income, and you may be lucky enough to have money left over after all your expenses are met. If so, there are a number of things you could do to help you get ahead financially such as:

Other considerations

Being a parent, there are some other important financial matters you should think about.

Ensure you have adequate insurance cover to help protect your loved ones should anything happen to you, make a will if you haven’t already got one, or update it to reflect your change in circumstances.

 

Source: AMP

* The Household, Income and Labour Dynamics in Australia (HILDA) Survey 2017, Table 2.11, pg 23

** Australian Government, Department of Human Services, Child Care Rebate

*** The Household, Income and Labour Dynamics in Australia (HILDA) Survey 2017, Table 2.13, pg 24

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Paul Baggetta is the Founder & Principal of Baggetta & Co. Paul Baggetta has been a Taxation Accountant since 1981, a Financial Planner since 1998, and in 1993 qualified as a Real Estate Licensee, holding a Triennial Certificate (currently not trading) and operated his own Real Estate business for property investment clients for over 5 years as a second business.

Financial planning services are provided by Paul Baggetta as an Authorised Representative (No. 261469) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. Australian Financial Services License No. 223135.

 

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