Teacher Jennifer Adams is savouring her last few moments at home with her 9-month-old baby, Oliver before she heads back to the classroom. She loves reading to him cuddling with him and watching him discover how to stand on his 2 tiny feet.

Adams is excited to get back to teaching, but she thinks it’s too early to leave her son. “It feels ludicrous for me to be sending him off so soon. I’m passionate about my career, but he’s not independent enough to be off at daycare,” says Adams. “Just having extra time to work with him on developmental milestones such as walking, before he goes to daycare, would be valuable.” Adam says she would love to spend more time at home, but she and her husband know it isn’t financially prudent.

Many Canadian mothers and fathers like Adams return to work earlier than they’d like because they can’t afford to stay at home with their infants.

Since December 3, 2017, new parents have had the option of staying at home for 18 months or 12 months. However, the extended benefits don’t mean parents receive more money. Rather, the extended benefits stretch out the same payments over a longer time. Here’s a guide to the benefits:

What are the maternal leave benefit rules?

To be eligible for Employment Insurance (EI) maternity or parental benefits, you must have worked at least 600 insurable hours in the 52 weeks before you make a claim. (That’s roughly the equivalent of working full-time for 15 weeks.)

Maternity benefits are for biological mothers who take time off for the birth of their babies. Women can begin receiving their 15 weeks of maternity benefits up to 12 weeks before their due date. Parental benefits are for biological mothers, biological fathers or adoptive parents taking care of their newborn or newly adopted children. If you meet the government’s criteria, there are now two options for the EI parental benefit.

What’s the difference between parental benefits and leave?

It’s important to note that there’s a difference between maternity/parental benefits, which are administered by the federal government through EI, and maternity/parental leave, which refers to how long your employer will hold your job for you. Jobs in federally regulated industries, such as banking and broadcasting, are governed by the Canada Labour Code, which has been amended to cover the parental leave extension. Jobs in other industries, however, are subject to provincial labour laws, which have been changed in some provinces, but not all. Check with your province’s labour ministry to find out where you stand.

Note also that Quebec has its own rules for maternity and parental benefits, through the Quebec Parental Insurance Plan.

What’s the “use it or lose it” benefit?

As of March 17, 2019, biological or adoptive parents will be able to get five more weeks of standard benefits and eight more weeks of extended benefits, for a total of 40 and 69 weeks, respectively – but only if they share them. Neither parent can claim more than 35 weeks of standard benefits or 61 weeks of extended benefits.

The standard parental benefit

If you choose the standard benefit, you will get 55% of your average weekly earnings, up to the maximum amount of $547 per week gross (or $51,700 annually gross) in 2018. Under this plan, you can receive up to 35 weeks of payments following the 15 weeks of maternity benefits, for a total of 12 months. You and your partner can split the 35 weeks of standard benefits in any combination you wish – including not splitting it at all. But to get five weeks more, you and your partner must split them.

The extended parental benefit

If you choose the extended parental benefit, you will receive 33% of your weekly salary, to a maximum of $328 a week gross (in 2018). These benefits can be extended to a maximum of 61 weeks following the 15 weeks of maternity benefits, for a total of 18 months. Like the standard benefit, you and your partner can split the extended benefit in any combination you wish, including not splitting it at all. But to get eight weeks more, you and your partner must split them.

Because of the difference in the amount of the weekly benefit, you must commit to either the 12-month or 18-month leave before your leave begins – so it’s vitally important to understand your options and work out your budget ahead of time.

Some parents, like lab technician Shawntel Bollers, say living off the standard benefit alone is challenging, and that living off even less for 18 months or more is a luxury few can afford.  

“With the extension also comes a decrease in the amount of money you receive weekly and that’s not okay, because the cost of living is so high,” says Bollers.

Bollers went on maternity leave when her daughter was born in November 2016, but went back to work after five months because her benefits were not enough for her family to live on.

“When you have a child, you want to be able to spend as much time with them as possible, but many parents simply cannot afford to stay at home for 18 months, even if they cut back on expenses,” Bollers says.

Daycare is cheaper for toddlers

Childcare costs are provincially regulated, which is one reason they vary across the country. In Quebec as of 2018, childcare costs start at $8.05 per day for your first child, or roughly $177 per month, and are capped at $21.95 per day (roughly $483 per month). The cost for additional children in care is substantially less. But parents outside Quebec pay much more: typically upwards of $1,000 per month in major cities like Vancouver and Burnaby in B.C., and London and Brampton in Ontario, based on 2014 data from the Canadian Centre for Policy Alternatives (CCPA).

Around the country, toddler daycare spaces cost less on average than infant spaces, which is why proponents of 18-month parental leave argue for the longer period. For example, in Toronto, the median cost of infant care in 2014 was $1,649 per month, according to the CCPA data. Toddler spaces in Toronto, though, cost around $1,332 a month.

Comparing standard and extended leave

Standard leave

  • Going back to work sooner means you can keep your skills more current and your job more secure. This is particularly important if your province hasn’t yet increased job protection.
  • You’ll earn more per week and more over 18 months, since you’ll go back to earning your regular salary six months sooner.

Extended leave

  • Daycare is cheaper for toddlers.
  • You can spend more time bonding with your child and fostering developmental skills.
  • Studies such as this one by researchers at McGill University and UCLA consistently show that mothers who stay at home with their infants longer generally have healthier infants.

Financial planning for your new baby

Whether you apply for the standard or the extended parental benefit, here are some financial steps to take before you take time off:

  • Find out how much money to expect. Refer to the federal EI Maternity and Parental Benefits or Quebec Parental Insurance Plan website for an estimate of how much you will receive when on leave.
  • Find out how long your employer will hold your job for you. Check with your employer’s human resources department or your province’s labour ministry.
  • Start saving now. As soon as you know you’re pregnant (or even as soon as you start trying to get pregnant), start putting away money specifically to cover costs while you’re off. A tax-efficient way to save is by automatically transferring money to a tax-free savings account (TFSA).
  • Prioritize getting out of debt. Aggressively pay off debt as quickly as possible before you leave work. For more tips on preparing for maternity leave: How to prepare your finances for maternity leave.
  • Make a new household budget for your family. Include projected baby expenses and your new household income while you’re on maternity leave and you and/or your partner is on parental leave.
  • See whether your income will cover your expenses while you’re on leave, with our budget calculator.

Having a baby is an exciting new chapter in life. But with each new chapter comes new financial changes. Whether you choose the standard benefit or the extended benefit, take the time to create a financial plan that accounts for the new life in your life.

Not sure where to start? An advisor can help you put together a solid financial plan that suits your family’s goals and needs. Find an advisor near you today.

More good reading for new parents: