On this Mother’s Day, American mothers and mothers-to-be are celebrated and honored across the land in ways large and small. While moms are appreciated and recognized today, the reality is that with motherhood comes many financial challenges for today’s working moms. From unpaid maternity leave to funding a 529 Plan, the expenses are numerous.
One way to lighten the financial load is to have an additional source of income that’s separate from one’s time (unlike normal job income which trades an employee’s time for a regular paycheck). Passive income can come in many forms such as dividends (my favorite), rental properties, affiliate marketing, selling products online, or peer-to-peer lending just to name a few. However, a passive income stream will require upfront work and take time to cultivate, so don’t expect non-trivial income overnight. Also, passive income is often a tool for reaching the long-term goal of FI (financial independence), but the great thing about it is one don’t need to achieve full FI in order to realize its benefits. Once on the path of passive income, the rewards (very very small at first) will be immediate and will only grow as time passes.
Here are five situations that passive income can help give a working mother or mother-to-be a financial edge:
1. Maternity Leave
Only 14% of US employers provide paid family leave, so unless a new mom is fortunate enough to have a family-friendly employer, her income will fall to zero while on unpaid leave. Paid vacation time can be used, but it won’t go very far when paid vacation time is commonly just 2 weeks for an employee’s first few years. A new mother could draw from her personal savings, but if she’s like the average American she has a scant amount of savings in the bank. But with a passive income source, even if it’s only a few hundred dollars per month, unpaid maternity leave at least becomes “somewhat paid” maternity leave.
2. Health Care Insurance and Care
Health care coverage for children isn’t cheap, and when mom returns to work the little bundle of joy will be added to her employer’s health care coverage. Depending on how the employer’s health insurance company handles coverage for dependents, this may take a big bite out of mom’s paycheck as her healthcare insurance contribution will increase. On top of increased health insurance costs, there’s also the matter of frequent visits to the doctor for checkups, preventive care, and treating the inevitable illnesses and injuries. Again, a source of passive income can help to reduce the added expenses of health care insurance and medical bills.
3. Day Care
Quality daycare is expensive for working mothers, but unless mom has a spouse or close family member to help look after the little one, there may be no other alternative to day care. Passive income can’t look after a child, but it can help mitigate the financial impact from the expense of daycare.
Whether it’s tutors, private school, extra-curricular classes (piano, ballet, ice skating, martial arts, etc), or funding a 529 Plan a child’s education can be expensive well before graduating high school and attending college. With a passive income stream, a working mom can put the extra money towards financing her child’s current various educational expenses as well as fund the child’s 529 Plan for future college education.
Anybody who has a job knows that a layoff or termination could happen at any time. Even in good times, companies are always restructuring and adapting to current and future business conditions. So developing a passive income stream is a good way to be prepared and have a financial safety net in case one’s position does become eliminated. When it does happen, having that secondary income stream will certainly help to lessen the impact from the loss of a regular paycheck and make unemployment feel less stressful.
A passive income stream probably won’t be able to cover the entirety of all the above expenses at the same time. But even a few extra hundred dollars every month in passive income will help to offset the loss of income while on maternity leave and help take the edge off the inevitable costs that come with raising a child to be healthy, safe, and educated.
With passive income, a mother has more options and is in a stronger financial position than when 100% dependent on a job for income. If you don’t already have a source of passive income, then get started. It will take time to build, so the sooner you begin, the sooner you will realize the benefits of having an income that doesn’t require trading your precious time for money.