Mat leave propels new mothers into debt
It takes women more than two years to bounce back financially after having a baby, leaving many fearful about their own financial security and nearly a quarter (23%) convinced they’ll never return to the financial position they were in prior to giving birth.
A study of new and expecting parents by smart money platform, Credit Karma, found that one in four (26%) women go into debt to cover maternity leave – averaging £2,800 in borrowing – that’s a £560 increase from 2018.
Nearly a quarter (23%) of women now have no savings when they go on maternity leave, but the rise in borrowing has been accelerated by the rising cost of living. According to the study, parents who borrow are using the money to cover basic expenses like groceries (42%), bills (32%), baby clothes and supplies (26%).
In addition, women with student loans face severe interest charges on their loans whilst on leave and unable to work, which already has a significant financial impact. A new mother accrues an average of £1,770 loan interest in just six months of leave.
Women often see childbirth impact their credit score too, which can see them set back nearly £17,000 more than men across their lifetime in interest. This is because many (17%) rely on their (usually male) partner’s income to apply for any required borrowing during maternity leave, giving him a chance to build up his score as the owner of more credit agreements. This is debt owed by both partners, however, in this scenario, mums don’t get credit for demonstrating positive borrowing behaviours.
Akansha Nath, Head of Partnerships at Credit Karma UK said: “Women are often disadvantaged financially throughout their life, and the responsibility to give birth plays a huge role in this gender disparity. At a time when the cost of living is affecting most people, and every penny counts, it’s more important than ever that women take advantage of any support available to them.”