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Investing
28 Jan 2025

Client Q's: Planning for a Baby

By Stephanie Pow from Crayon
 

The Crayon site shows you how to plan your finances for parenthood and is a fantastic resource for expecting parents and employers. Most recently they put together New Zealand's first Parental Leave Register

How much will spending change when you have a baby?

The estimated cost of raising a child is around $16,000 per year (BNZ and Plunket research from 2018). The true cost for your family can range significantly, For example, in New Zealand, the average cost of full-time daycare is $300 per week, whereas a nanny could cost  upwards of $1,000 per week. 

How can you work out how much time can you take off for maternity leave? 

  • First, work out what you’re entitled to from the government using the IRD website.

  • Next, see if your employer offers anything above this. The New Zealand Parental Leave Register documents parental leave policies from over 300 organisations employing 1 in every six working Kiwis.

  • From there, check if you’re entitled to Working For Families Tax Credits (most families will get Best Start for the first year)

  • You then need to calculate your spending rate, including the extra costs of raising a child, and factor in any savings to work out how long you can sustain being on parental leave.

If you want to dive into the numbers, Crayon can provide you with a guided experience via its Financial Baby Prep Program (currently only offered through employers).

How much are one-off costs? 

The Crayon Baby Gear List gives you an objective view of what you need and how much it will cost. Again, this can vary significantly. Essential items only at budget prices total $900. Buying all the items, including nice-to-have items, from high-end stores comes closer to $10,000.

How can I maximise the value of my annual leave around parental leave?

The calculations of annual leave can make your head spin! We’ve provided some suggestions below, and we recommend that you chat with your payroll team about your specific circumstances.
Considerations:

  • The value of your annual leave can decrease after parental leave, so financially, you could be better off using your annual leave before parental leave. (See “The impact of parental leave on annual leave in New Zealand”)
  • In addition, if you intend to start parental leave near public holidays, consider using your annual leave to extend the time that you are paid by your employer. For example, let’s say your child is expected to arrive on 3 January 2024 and you have an annual leave balance of 5 days. Your last day at work could be 22 January 2024 and those 5 annual leave days would be enough to ensure you’re paid for 9 days of work until 5 January. This is because if an annual leave day falls on a public holiday, you are still entitled to be paid for the public holiday and this payment doesn't come out of your annual leave balance. In this example, there are four public holidays between 22 January 2024 and 5 January 2024 (25 and 26 December, and 1 and 2 January). You can check the NZ public holidays calendar here.

How can I use my keeping-in-touch (KIT) hours to facilitate a gradual return to work?

Talk to your manager about using KIT hours to ease your way back into work. You can work up to 64 KIT hours while you’re on government-paid parental leave. You cannot use these hours within the first 28 days after the birth.

For example, before returning full-time, you could use your 64 KIT hours as follows:

  • Week 23 of parental leave: work two 4-hour days
  • Week 24 of parental leave: work two 8-hour days
  • Week 25 of parental leave: work two 8-hour days
  • Week 26 of parental leave: work three 8-hour days per week

You would be paid for these 64 hours at your normal wage rate while receiving government-paid parental leave. Just make sure to check whether a secondary tax rate will need to apply to your government-paid parental leave or KIT hours payment.

For more information on parental leave go here.

 

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