By Mike Brown
Despite Pew Research finding 82% of Americans are in favor of mothers getting paid maternity leave, just 17% of all U.S. workers have access to paid maternity or paternity leave according to the latest data from the U.S. < of Labor Statistics.
The United States is the only developed nation that does not mandate paid maternity leave, and that’s likely not changing anytime soon, if ever.
Private employers don’t want to incur extra costs, especially if hardly any other companies are offering a competitive paid maternity leave policy, and the cost of a government-run program would be astronomical.
So faced with this reality, how do mothers get by financially while on unpaid maternity leave?
Credit Card Debt, Emergency Savings, Side-Jobs, & Personal Loans
Breeze, the company I work for, conducted a survey of 1,000 American mothers who went on unpaid maternity leave in the last year.
For mothers that did not take out a disability insurance policy prior to their pregnancy, 20% dug into emergency savings to cover costs while on unpaid maternity leave, which on average lasts 10 weeks.
Another 17% incurred credit card debt, 11% took on a side-job, and 9% took out a personal loan.
Just 11% indicated they were able to afford expenses comfortably while on unpaid maternity leave, while 21% turned to their spouse or partner to shoulder the extra financial burden.
Those were the short-term financial impacts of unpaid maternity leave.
Long-term, 34% of mothers had to delay paying off student debt because of unpaid leave, 32% delayed building a savings fund, 32% delayed buying a home, and 29% delayed buying a car.
Mothers Also Worried About Child Development Because of Unpaid Maternity Leave
Perhaps the most concerning impact of unpaid maternity leave was that many mothers told us they returned to work sooner than they would have liked because the financial squeeze from unpaid maternity leave was becoming too much to bear.
As a result of this early return, most mothers were either extremely concerned or somewhat concerned that this early return to work will have an impact on the development of their child.
Is Disability Insurance the Answer?
With paid maternity leave incredibly rare, is short term disability insurance the most logical answer for mothers who are questioning how they will survive while on unpaid maternity leave?
From our survey, 40% of mothers took out a short term disability insurance policy before becoming pregnant, and 65% indicated the policy provided adequate financial coverage while they were on unpaid maternity leave.
23%, on the other hand, said the insurance did not provide adequate coverage.
Amongst this group, we found the average short term disability insurance policy replaced 50% of income while respondents were on unpaid maternity leave.
It appears that consumer education is a major hurdle however when it comes to using disability insurance as a financial safety net against unpaid leave.
Among mothers who did not take out a policy, 33% knew nothing about disability insurance, and 21% applied after they became pregnant, which is too late because the pregnancy will be counted as a pre-existing condition.
Another 16% incorrectly thought they’d automatically be eligible for paid maternity leave through the government or their employer.
With no ideal solution to lessen the financial struggles caused by unpaid maternity leave, the best thing expecting mothers and fathers can do is to prepare way ahead of time.
And that means before pregnancy. Create a budget, know what you have saved up, build upon those savings, and research if short term disability insurance might help your situation.
Bio: Mike Brown is the Director of Communications at Breeze, a modern insurtech company specializing in income protection through disability insurance and critical illness insurance.
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