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Thinking of Starting a Family? Plan Ahead
Questions about balancing work and starting a family are commonly asked by junior doctors. For those wondering, there really is no perfect time to start your family. It will always be challenging, but wonderful to have these competing interests in your life.
For those not interested in starting a family or not ready yet, harness the financial super powers of DINKs here.
Some choose to start early, enjoying relatively youthful parenting, others wait until most of the hard career climbing years are over, aware that time is always ticking away. This is a personal choice, and different options obviously suit different families. But there are a few issues to be aware of, and plan around to minimize financial stress.
Thinking of Starting a Family? Plan Ahead
Time to Bond…
In order to be legally entitled to parental leave, you have to have been employed by your employer for twelve months before the actual, or expected date of birth, date of adoption, or 1st day of leave. The legal entitlement is to 52 weeks of unpaid leave, with an option to request a further 52 weeks (although the employer can decline this).
The Australian Health system has generous parental leave benefits available, but due to the widespread use of temporary contracts, and being required to move hospitals for training, many doctors have missed out on paid parental leave (PPL). PPL is definitely worth considering the timing for, as it will give most families far more time to bond. It is also worth having union membership and attempting to get leave entitlements transferred between health services. If you are planning to stay in one health service for a long period, it is possible to negotiate a contract for more than one year. There is some variation in maternity leave according to health service. Leave can generally be taken at half pay for twice as long.
|Entitled after||Paid parental leave||Paid Paternal Leave|
|NSW||40 weeks||14 weeks||Paid 1 week|
|VIC||12 months||10 weeks||Paid 1 week|
|QLD||12 months||14 weeks||Paid 1 week|
|WA||12 months||14 weeks||Unpaid|
|ACT||12 months||18 weeks||Paid 2 weeks|
16 weeks (20 weeks if employed by SA for 5 years +!)
14 weeks (18 weeks if employed by NT health for 5 years +)
1 week paid
0-2 weeks paid depending on length of service
Obviously, if you are self-employed (as a GP or private specialist), you’re on your own! Forward planning and lots of savings will obviously make the financial stress far less of a burden.
The Government provide Paid Parental Leave for 18 weeks at the National Minimum Wage to the baby’s primary caregiver if they earned less than $150,000 during the previous financial year. There are detailed eligibility criteria on the website linked, but working mothers are entitled to this even if they are receiving PPL from work. It is paid via your employer. If you are self-employed, or not eligible for maternity leave this will help ends meet, and be gratefully received. If you are in the fortunate position of being paid PPL from work, this government PPL is a nice bonus that could get lost in the weekly expenses if not consciously allocated. Many parents use this allowance to start an education fund for their baby if it is not needed to fund maternity leave.
The Government also pay Dad and Partner pay – up to two weeks at National Minimum Wage for working dads, but they must not be being paid by work at the same time
AHPRA requires all registered doctors to meet minimum CPD standards per year (As per specialty or for general registration 50 hours over 1 year) plus have recency of practice standards: 152 hours within a registration period OR 456 hours over three registration periods. These are not too difficult to meet despite the extended time off as long as you plan ahead.
There is wide variation in how the specialty colleges treat maternity leave, and this, unfortunately, encourages more females to leave certain training programs. Most colleges have a maximum training time, and this can be an issue for parents wanting multiple children. It is worth checking your college’s requirements well before the baby is expected!
Planning Finances for Parental Leave…
It is essential to plan in detail, making sure you’re prepared for the financial challenges of taking time off will help take the pressure off and allow you to focus on the most important thing – your family.
Calculate Your Anticipated Expenses –
It’s time for a good old-fashioned budget! In my experience, these fanciful spreadsheets show little correlation to what is actually spent! PocketBook is a free app that you can link all bank accounts and credit cards, to categorize what was actually spent over a 12-month period. Sign up, ensure your expenses are categorized appropriately and use it to project anticipated monthly expenses during your time off.
You may be able to save on professional expenses during parental leave. “Run off Cover Scheme” allows you to have ongoing medical indemnity cover whilst not working for FREE. Call your medical indemnity insurer to enquire. AHPRA and specialty colleges MAY offer a discount depending on how long and the timing of your break from work.
Work out Your Anticipated Income –
- PPL from work
- Partner income
- Government PPL
- Government dad and partner pay
- How long are you taking off work?
- Will you supplement with any part-time work before going back to work fully?
Calculate Income Minus Expenses –
Does anyone EVER come up with surplus income after completing this calculation?! If you’re in the black, check you’ve done the maths right and move on to the next step
If you’re in the red, time to go over those expenses with a fine-tooth comb. What can be reduced or cut out to allow you the time off you desire?
Savings plan –
If you’re still in the red, time to work out how much time you have until starting maternity leave. Calculate how much you need to save per paycheck. Moneysmart has a handy savings calculator. A mortgage offset account is the best place to store these savings, or a high-interest savings account if you aren’t mortgaged up.
It’s not an uncommon time to feel overwhelmed with competing demands for your savings. Read about getting over money challenges.
Planning for the Future
Rarely do you get ahead by thinking short-term. Women currently retire with an average 47% less than men. Maternity leave and part-time work are significant contributors to the gap.
Spouse Super Contributions – If you or your partner will earn less than $40K in a financial year, the higher income earner can claim up to $540 tax offset by contributing $3000 to your super ($120/FN).
Government Co-Contribution – If you or your partner earn less than $57K in a financial year and make $1000 after-tax contributions ($40/FN), the government will partially match your contributions with up to $500!
Maximise your Concessional Super Contribution – If you’re not maxing this out, consider salary sacrificing extra in to super
Your Family’s Future
Consider your ongoing budget after the baby is born. When are you and your partner going back to work? Full or part-time? Are you planning a house move? Private education? What would you like your lifestyle to look like? Can you afford it? Do you need to make any changes to your expenses to save for the future?
Your Child’s Future
Do you wish to save for your child’s education costs, university, or house deposit? Consider whether you would like to automate a small amount of savings towards your goals for your child each paycheck. Pearler, Vanguard personal investor and your super allow automated direct debit deposits into the stock market. If you need a little more help, consider a micro-investment account like RAIZ who simplify the process even more.
Regardless of whether you want to give your child a financial step up, Scott Pape’s (The Barefoot Investor) book on money & kids is a great resource. Also, check out the full article on how and where to save for your child.
Shopping for Baby
It’s probably best you get a firm understanding of your financial situation before going wild shopping for your little one. Baby preparation costs range from zero to thousands of dollars. It is so tempting to buy the “Best” (aka most expensive) or everything, but this benefits… who? The bub doesn’t care, and it won’t benefit your family if you actually can’t afford it. So work out what situation you are in, what, if anything you would like to splurge on and consider asking family, friends, and workmates for much-loved hand-me-downs.
Best of luck with your family plans. A little bit of forward planning can make things smoother. But even if you have a “Surprise” baby, you can work through the steps above to work out your position and make it work for you.
A Quick and Easy Guide to Super for Interns
Congratulations on showing even passing interest in super at such an early stage of your career! A little bit of forward thinking at this stage will be a major factor in defining your wealth long-term. Small steps like ensuring you’re in an appropriate super fund, in the right asset allocation and optimizing your contributions have a massive effect when played out over 30 or 40 years of compound growth on your side! If you have a little less time don’t worry. It’s still likely the longest stretch of time you will invest.
Super Powers: Compound Interest and Tax Minimisation
This graph demonstrates the amazing effect of compound interest over a 40-year period. By far the most powerful factor in your lifetime wealth is time investing.
These calculations are based on an intern earning $70,000 whose employer is contributing 9.5% contributions, taxed at 15% ($217/FN net). Growth is assumed at 7%, with a 1% fee. This is assuming you never earn more than an average intern wage!
Unfortunately, inflation also has to be considered, so in today’s money, this would be worth around $436000 (assuming 3% inflation).
Easy Guide to Super: Protect your Super from Highway Robbery
Fees are the next major factor that will make an impact on your long-term wealth.
Some financial advisors will try to charge up to 4%. Over time, these excessive fees just don’t pay off.
You’ve all heard the adverts – multiple super funds charge you multiple fees, and you’re best off combining them. Do you have any puny super balances from pre-or during medical school? If so, remember that tiny balance could grow significantly over 40 years…or be eaten up by fees and lost. You can probably get this done in ten minutes! The ATO can help locate your lost super, and you can roll super from one fund to the other directly on the same site. Alternatively, you can contact your super funds or find their “Rollover” forms on the website.
Insurance is a big topic. Check out what you have through your Super, and think about what you need. Consider seeing an insurance broker if you feel you need better coverage.
Beware some super income protection is only for 2 years. If your super fund hasn’t received contributions or a rollover in 16 months your insurance gets canceled unless you contact them. If considering canceling insurance, consider that if you develop a chronic medical condition in the meantime you may not be able to secure insurance again. If children are in your future you are likely to need significant insurance in the future.
Easy Guide to Super: Choose Carefully but Make the Decision
Choosing a super fund can seem overwhelming. Take an evening to look at the options and make a decision. Review this every ~ 5 years or when you change employers. Canstar has a great resource to help review your employer’s default fund and narrow down alternatives if appropriate. Important factors to look at are fees, insurance, and long-term performance (Over 10+ years).
Asset allocation is another important decision that you should consider early in your intern year. If you do not make a choice, your super will generally be put into a default “Balanced” fund.
When thinking about asset allocation, consider athe number of years to retirement – generally consider more aggressive allocations with longer to go before retirement.
More aggressive portfolios are expected to deliver higher returns over the long term but are associated with higher volatility.
If you choose a higher volatility fund, you need to be able to ride out severe market downturns. If you are going to panic and sell during a market crash, a lower volatility choice is likely to perform better for you. MoneySmart has an article on choosing your fund allocation.
Optimise Contributions – Claim All Free Money Available
When I signed up for my first post, I stared at the super options (including how much to contribute) in confusion and followed the advice of a random HR person as to which box to tick!
I’m hoping you will go in a bit better informed!
You will have an option to designate a super fund or allow your employer to pay into their default fund on your behalf. A minimum of 9.5% is paid by your employer into your super by law, but some employers will pay extra if you contribute voluntarily. I encourage you to contribute what you need to get the full extra employer contribution if it’s an option. Again, it’s free money, and you will never miss it if this starts from your 1st paycheck!
In your 1st year, and any time you take a career break you have a special opportunity to claim free money into super. If you have income less than $37697 (which is likely in your intern year as you start work halfway through the tax year), and make a voluntary contribution of $1000 (or $40 per fortnight) the government will give you $500 free money (into super)!
That is a 50% guaranteed, risk-free return!
If anyone else offers you this, they are probably trying to scam you, it’s too good to be true.
Even if you earn up to ~$50,000 in a financial year, you will get some benefit. Details on the ATO website, but it’s very simple to set up a BPAY every pay cycle to your super account and then claim it on your tax return. Amazingly, if you claimed the 1st year’s co-contribution and then continued paying the extra $40 per fortnight into super over 40 years you would be $177,043 better off (Assuming Net 6% growth).
The biggest factor that puts people off putting extra cash into super is legislative risk. The government has a habit of fiddling with super, and delays to future preservation age are likely. The lack of control you have over your super is a reason to be cautious about putting lots extra in years ahead, but small amounts really add up. Consider putting in an amount you won’t miss, especially when rewarded by a tax offset or co-contribution.
If you have worked through this list, I think you’re WAY ahead of the pack in building your future wealth. Good luck with your internship, I hope your patients are interesting and your colleagues supportive. Enjoy!
Check out the up-to-date guide to choosing your super fund.
Your wealth accumulation journey starts as soon as you make the first step. Subscribe to Aussie doc for a weekly email to keep you up to date on track with your goals.
Aussie Doc Freedom is not a financial adviser and does not offer any advice. Information on this website is purely a description of my experiences and learning. Please check with your independent financial adviser or accountant before making any changes.