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If you are considering having kids (or already have some and want more) in the next few years, you need to be aware of something known as the Motherhood Penalty.
The cost of raising a child is significant; estimates suggest that in New Zealand, it ranges from $175 to $500 per week, translating to $163,800 to $468,000 across 18 years. The variation comes from discretionary expenses such as kids' activities, family holidays, the size of your house, and how much you spend on kids' stuff like technology, toys, books, and presents. The logical reality is that households with more disposable income will spend more on their kids, and most of us don’t hesitate to splurge on things like a new bike or shoes or buying them an overpriced fluffy at a café.
However, this piece isn’t about budgeting, and it isn’t about the cost of raising kids – it’s about the price mothers are paying across their lifetime as they are financially penalized for simply being mothers.
It would be bad enough to discover that being a parent comes with a financial disadvantage, but what’s worse is that research has consistently found men to be rewarded by their transition to fatherhood while mothers are penalized for their new status. The Motherhood Penalty has a counterbalance – the Fatherhood Bonus.
Research demonstrates that every child a woman has, she takes a roughly 4% hit on her salary, while fathers receive a 6% higher income on average, with fathers being so favoured that they are out-earning both men and women without kids. This is because fatherhood, ultimately, is considered a “valued characteristic, signalling perhaps a greater work commitment, stability, and deservingness,” said Budig, Sociology Department chair at the University of Massachusetts Amherst, where this research was initiated.
Mothers, on the other hand, are often perceived as “exhausted and distracted at work,” rendering them less productive.
Not only do mothers, even those who return to full-time work, earn on average 12.5% less than their male counterparts across their career, but they are also less likely to be hired in the first place. In a study that sent identical CVs to employers but implied that some applicants were parents, mothers were half as likely as fathers to be called back for an interview, and fathers were actually more likely to be called back than childless men.
Mothers are less likely to be hired, are offered lower starting salaries, and are less likely to be promoted or given opportunities for training and upskilling to progress their careers.
For women under 35, the pay gap between mothers and women who are not mothers is even bigger than the gender gap – so that’s confronting!
In an environment with skyrocketing living costs, not to mention house prices, where most young adults are starting out with significant student loans as well, it’s no wonder that Millennials (currently 28-43 years old) are either waiting longer to have children or choosing not to have them at all.
But having put all the facts on the table, if you want to have a family and a career (because it’s 2024, not 1954!), what is actually within your power to make sure you mitigate unconscious discrimination as much as possible?
1. Check out the Parental Leave Register where so far 240 NZ companies have joined in to share their parental leave policies. If you want to make sure your employer will be supportive of you, your family, and your career when you get pregnant, it’s worth checking them out on here before accepting a job offer!
2. One of the largest barriers for women and especially mothers is the unequal load outside of work. Studies show that in hetero relationships, even when women are in full-time employment and earn as much as their partners, they are still doing significantly more childcare and housework. If you plan on having kids in the next few years, start by evaluating your current patterns of household chores and discuss your expectations around childcare when the baby arrives.
3. Talk to your employer about expectations on both sides for when you return. How much flexibility will you have? How will success and readiness for promotion be assessed? Do you have a structured plan for career development that can be created before you go on leave and implemented on your return?
4. One of the biggest costs to women across their career is the lost retirement savings as they stop contributing while on maternity leave. This means missing out on dollars invested but also all of the returns you would’ve had. If your household can afford it, discuss whether your partner can contribute 3% to your KiwiSaver for however long you’re off paid employment. If that can increase to 6%, even better, as that will replace your usual contributions plus your employer's. At the very least, make sure you hit the $1024 each financial year to get the $521 from the Government.
5. Not too dissimilar to my first tip – but if you are already on parental leave and have a hunch (or know for sure) that your job is not going to give you what you need, you can always look around for a better option. I realized when I had my daughter that the 12-hour shifts and a capped earning structure of nursing weren’t going to work for me and made the move into Financial Advice with no regrets. While recognizing that this isn’t feasible for all new moms, if you have the supports around you to allow it, consider whether there are jobs out there with better flexibility, supports, or policies for supporting Moms to succeed.
As always, open communication (whether with your employer or your partner) is key. Knowing that this double standard exists, how it presents, and that a lot of it is systemic and therefore out of our control can help us plan for the future. But there is always at least one thing you can do to improve your situation, and if you can’t find anything, come in for a chat, and I will help you shift the dial towards a slightly fairer outcome.
Elizabeth.
I see my role as a Financial Adviser not just to advise on individual aspects of your finances, and certainly not to simply transact on your behalf. My role is as a guide, to help chart the course, provide scaffolding and support as you progress and redirect you if you’re getting lost in the weeds. Most of our regrets, I have found, come from not having started sooner. So, let’s start today.
Hi, I'm Elizabeth, one of the Financial Advisers here at Velocity Financial. Day-to-day, this involves engaging in conversations with clients about their lives, families, aspirations, and, of course, financial goals. In a big picture sense, though, I'm driven by my perpetual desire to improve outcomes for individuals and, eventually, communities. At Velocity we aim to bolster the financial literacy of Kiwis, helping to alleviate financial anxieties, and opening up the possibilities of what can be achieved. We empower our clients to formulate a plan for the future. I'm particularly passionate about assisting women in reaching their financial goals and feeling confident in managing their money. To aid in this, I write a monthly blog on topics that affect women and maintain an Instagram page @what_would_she_do.vf. This platform provides financial content for those who might not be prepared to consult with an adviser yet but still require and deserve sound advice. In my past life, I was a nurse, so helping people is essentially my modus operandi (I'm also quite resilient and not easily grossed out!). During my spare time, I'm likely attempting to keep up with my energetic kids. If I do manage to find some time for myself, you'll find me curled up with a coffee and a book.
Elizabeth is the author of the monthly blog What Would She Do? A column for women, by women.
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Disclaimer: Elizabeth Tsikanovski (FSP693611)is a Financial Adviser with Velocity Financial (FSP95466). No investment decision should be taken based on the information in this blog alone. Please see Elizabeth’s disclosure statement on our website.
Always get professional advice
The information shared in this post is meant to be general guide to support you on your journey. When making important decisions about your finances, we encourage you to seek independent financial advice first, tailored to your unique situation. As well as talking with a financial adviser, make sure you talk to your lawyer and accountant too – together they'll help you find the best solution for your specific situation. Our knowledgeable financial advisers are here to help. Check out our website for the details about our financial advisory services in our disclosures https://www.velocityfinancial.co.nz/disclosure-statement.