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How do you plan your finances for parental leave?
Understanding parental leave and available benefits
Starting a family is an exciting chapter in your life! It’s a major step that will bring about big changes in your personal and professional life and one that requires careful planning, especially when it comes to finances.
Getting organized before parental leave
As future parents, you will have to make a number of decisions, plan the parental leaves to which you are entitled, assess your income situation, and redo your family budget.
Whether you are a wage earner or a self-employed worker, the Québec Parental Insurance Plan (QPIP) has different formulas for determining the benefits to which you are entitled during your parental leave, under certain conditions.
Types of parental leave benefits
- Maternity: for the mother only
- Paternity: for the father only
- Parental: may be shared by the biological parents
- Adoption: may be shared by the adoptive parents
Choosing a parental leave plan
According to the type of plan, the number of benefit weeks varies, as does the percentage of your income paid, which is based on your average weekly compensation before the leave. For 2023, a maximum amount of $91,000 is used for the calculation.
The choice of plan is crucial for both parents and it cannot be changed.
Table 1 – Benefits QPIP – Birth |
|||
|---|---|---|---|
| Basic Plan | |||
| Benefits | Maternity | Paternity | Parental (shareable) |
| Number of weeks | 18 | 5 | 32 |
| % of income | 70% | 70% |
First 7 weeks at 70% |
| Special Plan | |||
| Benefits | Maternity | Paternity | Parental |
| Number of weeks | 15 | 3 | 25 |
| % of income | 75% | 75% | 75% |
| For more information on benefits related to childbirth, visit the official website of the Quebec Parental Insurance Plan. | |||
Table 2 – Benefits QPIP – Adoption |
||||
|---|---|---|---|---|
| Basic Plan | ||||
| Benefits | Adoption (non-shareable) | Welcome and support benefits (shareable) | Adoption (shareable) | Multiple adoption (non-shareable) |
| Number of weeks | 5 (each) | 13 | 32 | 5 (each) |
| % of income | 70% | 70% | First 7 weeks at 70% Next 25 weeks at 55% |
70% |
| Special Plan | ||||
| Benefits | Adoption (non-shareable) | Welcome and support benefits (shareable) | Adoption (shareable) | Multiple adoption (non-shareable) |
| Number of weeks | 3 (each) | 12 | 25 | 3 (each) |
| % of income | 75% | 75% | 75% | 75% |
| For more information on adoption-related benefits, visit the official website of the Quebec Parental Insurance Plan. | ||||
Calculate your parental leave benefits
What will your financial situation be like after the birth of your baby? Here’s a fictitious example to illustrate the impact of this change for a couple. Remember that this is a fictitious example, and that you can run your own personalized simulations using the QPIP benefit calculation simulator.
Table 3 – Example of a financial situation before and after parental leave |
|||
|---|---|---|---|
| Before the birth | After the birth | ||
| Income | Income and RQAP | ||
| Mother’s net income | $70,000 | Mother’s net income | $50,000 |
| Father’s net income | $40,000 | Father’s net income | $39,000 |
| TOTAL | $110,000 | TOTAL | $89,000 |
| Net income | $110,000 | Net income | $89,000 |
| Cost of living | $80,000 | Cost of living | ($80,000) |
| SURPLUS | $30,000 | Child expenses | ($10,000) |
| DEFICIT | $1,000 | ||
Assessing the financial impact of parental leave and the baby budget
Your financial situation changes when your baby arrives. Your budget after the birth of your child will be very different from your current budget.
How will you be able to maintain a work-family balance in your new circumstances? Here are some tips:
- Prepare a family financial statement and current budget
- Assess your parental leave situation (benefit simulation)
- Calculate your income deficit
- Make a plan to resolve the expected deficit
Your long-term family and tax planning
Your new parental responsibilities will entail additional expenses and require major adjustments in different areas:
- Insurance
- Savings (RESP , TSFA)
- Legal and estate planning
- Tax planning
What is the best strategy for you and your young family? Even if your new family budget is a challenge, it’s possible to achieve a balance. Good planning will enable you to chart your course, adjust to the changing needs of your children as they grow older, and stay focused on your goals!
To help you explore these issues, fdp Private Wealth Management provides you with access to specialized resources and personalized support. To learn more, please contact a member of the fdp Private Wealth Management team.